20230825-招银国际-药师帮-09885.HK-Digitalizing_outside-of-hospital_pharmaceutical_circulation_market_in_China_47页_2mb

Report Summary: YSB (9885 HK) - Digitalizing China's Outside-of-Hospital Pharmaceutical Market

Executive Summary

CMB International Global Markets initiates coverage of YSB (9885 HK) as a "Buy" recommendation, targeting HK$57.97 (17.1% upside from current price). YSB is positioned as China's leading digital platform for outside-of-hospital pharmaceutical circulation, leveraging a dual-growth model of Online Marketplace and Self-operation Business to address industry fragmentation and inefficiencies.

Analyst Recommendation

Initiate: BUY

• Target Price: HK$57.97 (17.1% upside)
• Rating: BUY (potential return >15% over 12M)

Key Investment Thesis

1. Leading Market Position & Business Model

• Ranked No.1 in China's digital outside-of-hospital pharmaceutical market (21.0% share in 2022 GMV).
• Runs dual growth engines:
  • Online Marketplace: Digital B2B platform connecting sellers & buyers (59.8% of GMV FY22).
  • Self-operation Business: Direct product fulfillment & sales (40.2% of GMV FY22), including high-margin Targeted Product Launches.

2. Market Opportunity

• China's outside-of-hospital pharma market expected to grow at 9.6% CAGR (2022-2027), vs. 0.4% hospital market ("China's Pharmaceutical Circulation Market").
• Digital penetration remains low (28.2% in 2022), creating significant growth potential ("Comparison of In-hospital Market and Outside-of-hospital Market").

Financial Analysis & Valuation

3. Financial Projections ("Financial analysis")

• Revenue Growth: Rapid CAGR of 34% expected (2022-2025E), driven by expanding Self-operation business (25.4%-39.4% YoY FY23E-FYE).
• Margin Improvement: Gross margin projected to increase from ~10% to 12.8% by 2025E ("Financial analysis").
• Profitability: Non-IFRS adjusted net profit is expected to turn positive in 2023E (~HK$179M), increasing significantly thereafter ("Financial analysis").

4. Valuation

• DCF model values YSB at HK$57.97, based on WACC 13.7%, terminal growth 3.0% ("Valuation", "DCF Valuation").

Competitive Landscape

5. Market Structure

• Dominated by large players, with YSB holding 21.0% GMV share in 2022 ("Competitive landscape of China’s digital market...", "Major players in China’s digital market...").
• Modeled after successful US pharma distribution platforms ("Development in the internet and big data").

Risks & Considerations

6. Key Investment Risks

• Uncertainty in future profitability ("Investment risks").
• Fluctuations in demand from small- to mid-sized pharmacies and primary healthcare institutions ("Investment risks").
• Evolving regulatory requirements ("Investment risks").

Conclusion

YSB Capitalization at initiation marks the beginning of coverage with a strong "BUY" recommendation based on leadership position, potential market capture in the digitalizing outside-of-hospital pharmaceutical market, and projected financial improvement ("Analyst Certification and Important Disclosures").