PA Good Doctor (1833 HK) Company Update Summary
Core Content
PA Good Doctor is a leading player in China's healthcare sector, focusing on online medical services, consumer healthcare, and health management. The company is actively upgrading its channels and services to enhance its market position and expand its reach in the digital healthcare landscape.
Regulatory Developments
- Online Medical Services Reimbursement: In Jan 2021, the National Healthcare Security Administration (NHSA) issued guidelines allowing reimbursement for online medical consultations and related drug expenses. These guidelines apply to qualified online hospitals and pharmacies.
- O2O Services: Pharmacies are permitted to offer "O2O" services, where patients receive prescriptions from online hospitals and then purchase drugs from offline pharmacies.
- Cross-Region Reimbursement: The government has indicated that cross-region reimbursement for online medical services will be implemented in the future.
- Chronic/Severe Diseases: The policy now allows reimbursement for revisiting patients with chronic or severe diseases, with the expectation that this will expand to more common diseases and even allow initial online diagnosis in the future.
Strategic Initiatives
- Expansion of Physician Team: PA Good Doctor is expanding its in-house physician team, increasing from 1,409 as of end-2019 to over 2,000 by end-2020E and more than 3,000 by end-2021E.
- External Physician Team: The company is also aggressively expanding its external physician team to provide more comprehensive services.
- Online Hospital Network: It operates the largest number of self-built and co-constructed online hospitals and plans to expand its network to major Chinese cities.
- Corporate Clients: Leveraging Ping An Group's extensive corporate client base, PA Good Doctor is penetrating more corporate clients and offering membership services to their employees and customers.
Financial Overview
| FY |
Revenue (RMB mn) |
YoY Growth (%) |
Net Profit (RMB mn) |
EPS (RMB) |
| FY18A |
3,338 |
- |
- |
N/A |
| FY19A |
5,065 |
52 |
- |
-0.73 |
| FY20E |
6,489 |
28 |
- |
-0.89 |
| FY21E |
8,923 |
38 |
-1,020 |
-1.16 |
| FY22E |
12,467 |
40 |
-1,331 |
-0.84 |
Earnings Summary
- Revenue Growth: Expected to grow at a CAGR of around 38% in FY21E and 40% in FY22E.
- Net Profit: The company is projected to report net losses for FY21E and FY22E, but is expected to turn positive in FY23E.
- EPS: The estimated EPS is expected to decrease from FY20E to FY21E but may improve in FY22E.
Valuation
- Target Price (TP): HK$142.1 (down from HK$150.0)
- Price Performance: The stock has underperformed both in absolute and relative terms over the past 12 months.
- DCF Valuation: Based on a 10-year DCF model with a WACC of 9.3% and a terminal growth rate of 4.0%, the equity value is estimated at HK$142.1 per share.
- Sensitivity Analysis: The TP is sensitive to changes in WACC and terminal growth rate, with the highest TP at 151.2 when WACC is 8.3% and terminal growth rate is 3.0%.
Peer Comparison
| Company |
Ticker |
Price (HK$) |
TP (HK$) |
Upside (%) |
P/S (x) |
P/E (x) |
P/B (x) |
| PA Good Doctor |
1833 HK |
92.4 |
142.1 |
53.8% |
14.7 |
N/A |
6.2 |
| JD Health |
6618 HK |
170.2 |
N/A |
N/A |
24.5 |
N/A |
19.5 |
| Alibaba Health |
241 HK |
27.05 |
N/A |
N/A |
33.6 |
N/A |
83.7 |
| Teladoc Health |
TDOC US |
263 |
N/A |
N/A |
35.2 |
N/A |
5.2 |
| Health Catalyst |
HCAT US |
51.33 |
N/A |
N/A |
11.6 |
N/A |
6.4 |
| Average |
- |
- |
- |
- |
23.9 |
15.1 |
24.2 |
Key Financial Ratios
| Metric |
FY18A |
FY19A |
FY20E |
FY21E |
FY22E |
| Gross Margin |
27% |
23% |
27% |
30% |
33% |
| Net Margin |
-27% |
-14% |
-16% |
-15% |
-8% |
| ROE |
-12.7% |
-7.4% |
-8.2% |
-9.1% |
-7.1% |
| ROA |
-9.9% |
-5.9% |
-6.7% |
-7.6% |
-5.7% |
| Current Ratio |
4x |
3x |
5x |
4x |
4x |
| Trade Receivables |
48x |
39x |
36x |
36x |
36x |
| Trade Payables Turnover |
210x |
153x |
160x |
160x |
160x |
Investment Recommendation
- Rating: BUY
- Reasoning: The company is investing in channel penetration and service upgrades, which could drive growth. Despite potential one-off foreign exchange losses, the outlook for online medical services remains positive, with regulatory support and market expansion.
Shareholding Structure
| Shareholder |
% Ownership |
| Ping An Insurance |
41.31% |
| Employee |
19.26% |
| Soft Bank |
4.42% |
| Other shareholders |
35.01% |
Risk and Disclaimer
- The report contains general information and is not tailored to individual investors.
- CMBIS is not a registered broker-dealer in the United States and does not provide investment advice.
- The information is subject to change and is based on publicly available data.
- There may be conflicts of interest due to CMBIS's involvement in the market.
