Core Viewpoint - UBS believes JD Health is enhancing user experience and expanding market share through increased reinvestment [1] Revenue Growth Projections - JD Health's revenue compound annual growth rate (CAGR) is expected to be 15% from 2024 to 2026, surpassing peers [1] - UBS has raised JD Health's revenue forecasts for 2025-2027 based on accelerated online drug penetration and market share expansion [1] Target Price and Rating - The target price for JD Health has been increased from HKD 35.2 to HKD 45, with a rating of "Buy" [1]

Investment Rating - The report maintains an "Outperform" rating for JD Health International with a target price of HK$42.90, reflecting a potential upside from the current price of HK$35.75 [2][9]. Core Insights - JD Health's revenue for 2024 slightly exceeded market expectations, achieving RMB 58.2 billion, a year-on-year increase of 8.6%. The adjusted net profit reached RMB 4.8 billion, surpassing expectations by 15.9% due to scale effects, resulting in a net profit margin of 8.2% [3][19]. - The company experienced strong growth across all major product categories in Q4 2024, with revenue of RMB 16.5 billion, marking an 11.3% increase. This performance indicates a recovery and growth trajectory post-pandemic [20][21]. - The number of merchants on the platform has significantly increased, contributing to a robust ecosystem characterized by comprehensive products, low prices, and high quality. The number of merchants grew from over 20,000 in 2022 to over 100,000 in 2024 [21][22]. - JD Health is expanding its offline pharmacy presence, with nearly 60 self-operated O2O stores opened in Beijing by the end of 2024, enhancing its market reach and operational capabilities [22]. - The company is optimistic about the integration of AI in healthcare, with a growing active user base of 180 million and daily online consultations exceeding 490,000. This positions JD Health favorably in the evolving internet healthcare landscape [23][24]. Financial Summary - Revenue projections for 2025 and 2026 are set at RMB 66.6 billion and RMB 75.7 billion, respectively, indicating year-on-year growth of 14.5% and 13.7% [25][26]. - Adjusted net profit for 2025 and 2026 is expected to be RMB 4.4 billion and RMB 5.4 billion, reflecting a year-on-year growth of -7.3% and 20.5% [25][26]. - The report highlights a DCF valuation predicting the company's equity value at HK$136.8 billion, corresponding to a share price of HK$42.90, with a WACC of 9.2% and a perpetual growth rate of 2.0% [26].

Investment Rating - The investment rating for JD Health is maintained as "Buy" with a target price of HKD 42.70 [4][7]. Core Views - JD Health's total revenue for 2H24 is projected to be RMB 29.8 billion, representing a year-on-year increase of 12.9%, which is better than the Visible Alpha consensus estimate of 11.2%. The non-IFRS net profit is expected to be RMB 2.1 billion, with a non-IFRS net profit margin of 7.2%, an increase of 1.9 percentage points year-on-year [1][2]. - For 2025, revenue growth is anticipated to improve to 13.8%, driven by enhancements in instant retail service capabilities and exploration of AI applications in the healthcare sector [1][3]. Summary by Sections Revenue and User Growth - In 2H24, sales revenue from pharmaceuticals and health products increased by 10.7% to RMB 24.9 billion, while platform, advertising, and other service revenues grew by 25.3% to RMB 4.9 billion, primarily due to sustained growth in advertising revenue [2]. - As of the end of 2024, JD Health's annual active user count reached 184 million, with a net increase of approximately 12 million year-on-year [2]. Operational Enhancements - Management plans to enhance fulfillment capabilities in instant retail scenarios in 2025, focusing on optimizing service efficiency and integrating online and offline operations [3]. - JD Health is recognized as a pioneer in the large-scale application of AI models in the internet healthcare sector, with its "Jingyi Qianxun" model being the most widely adopted in the industry [3]. Profitability and Valuation Adjustments - The non-IFRS net profit forecasts for 2025 and 2026 have been adjusted downwards by 6.4% and 7.4% to RMB 4.41 billion and RMB 4.69 billion, respectively, due to increased business investments [4][11]. - The target non-IFRS PE valuation for 2025 is set at 28.0x, which is a premium compared to the average PE of comparable companies at 15.2x, reflecting JD Health's higher operational efficiency and first-mover advantage in AI healthcare [4][13].

Investment Rating - The investment rating for JD Health (06618.HK) is "Buy" with a target price not specified [4]. Core Views - JD Health reported a revenue of 58.16 billion yuan for 2024, representing an 8.6% year-on-year increase from 53.53 billion yuan in 2023. The self-operated product revenue was 48.80 billion yuan, up 6.9%, while service revenue reached 9.36 billion yuan, growing by 18.9% [1][2]. - The company's gross margin increased by 0.7 percentage points to 22.9%, driven by revenue mix optimization. Annual profit reached 4.16 billion yuan, a 94.0% increase year-on-year, with adjusted Non-IFRS net profit at 4.79 billion yuan, up 15.9% from 4.14 billion yuan in 2023 [1][3]. - Active user count reached 184 million by December 31, 2024, an increase of 11.3 million from the previous year, with over 100% growth in the number of third-party merchants exceeding 100,000 [1][2]. Revenue Breakdown - Self-operated product revenue for 2024 was 48.80 billion yuan, reflecting a 6.9% increase, supported by strengthened supply chain capabilities and collaboration with global pharmaceutical companies [2]. - Service revenue for 2024 was 9.36 billion yuan, up 18.9%, primarily due to an increase in the number of advertisers and growth in third-party merchant commissions [2]. Operational Data - The average daily online consultation volume exceeded 490,000 in 2024, indicating enhanced capabilities in medical service delivery through specialized services and AI applications [2][3]. - JD Health expanded online medical insurance payment services in 18 cities, connecting over 3,000 designated pharmacies, covering a population of over 100 million [2]. Profitability Optimization - The gross margin improved to 22.9%, attributed to a higher proportion of high-margin service revenue and product mix optimization. The fulfillment cost ratio increased by 0.5 percentage points to 10.4% due to logistics network expansion [3]. - The selling expense ratio slightly increased by 0.2 percentage points to 5.2%, mainly due to increased marketing investments, while general and administrative expenses improved significantly by 1.3 percentage points to 2.4% [3]. Future Projections - Revenue forecasts for 2025, 2026, and 2027 have been adjusted to 62.7 billion yuan, 71 billion yuan, and 80.9 billion yuan, respectively, with adjusted net profits projected at 4.4 billion yuan, 5.1 billion yuan, and 6 billion yuan [4].

Investment Rating - The investment rating for JD Health (06618.HK) is "Buy" with a target price not specified [4]. Core Insights - JD Health reported a revenue of 58.16 billion yuan for 2024, representing an 8.6% year-on-year increase from 53.53 billion yuan in 2023. The self-operated product revenue was 48.80 billion yuan, up 6.9%, while service revenue reached 9.36 billion yuan, growing by 18.9% [1][2]. - The company's gross margin increased by 0.7 percentage points to 22.9%, primarily due to revenue mix optimization. Annual profit was 4.16 billion yuan, a 94.0% increase year-on-year, with adjusted Non-IFRS net profit at 4.79 billion yuan, up 15.9% from 4.14 billion yuan in 2023 [1][3]. - Active user count reached 184 million by December 31, 2024, an increase of 11.3 million from 172 million in 2023. The number of third-party merchants exceeded 100,000, doubling year-on-year, and daily online consultations surpassed 490,000 [1][2]. Revenue Breakdown - Self-operated product revenue for 2024 was 48.80 billion yuan, reflecting a 6.9% growth, supported by deepening collaborations with global pharmaceutical companies and expansion in chronic disease management categories [2]. - Service revenue amounted to 9.36 billion yuan, up 18.9%, driven by an increase in advertisers and third-party merchant commissions. The platform's merchant count exceeded 100,000, indicating significant scale effects [2]. Operational Developments - JD Health expanded online medical insurance payment services in 18 cities, connecting with over 3,000 designated pharmacies, covering a population of over 100 million. Innovations in offline pharmacy models and home healthcare services were also introduced [2]. Profitability Enhancement - The gross margin improved to 22.9%, attributed to a higher proportion of high-margin service revenue and product mix optimization. The fulfillment cost ratio increased by 0.5 percentage points to 10.4% due to logistics network expansion, while administrative expenses saw a significant improvement [3]. Future Projections - Revenue forecasts for 2025, 2026, and 2027 have been adjusted to 62.7 billion yuan, 71 billion yuan, and 80.9 billion yuan respectively, with net profit estimates of 4.4 billion yuan, 5.1 billion yuan, and 6 billion yuan [4].

Investment Rating - The investment rating for JD Health (06618.HK) is "Outperform the Market" [1][3][12] Core Views - In H2 2024, JD Health achieved a revenue of 29.8 billion yuan, representing a year-on-year increase of 13%. The growth was driven by an increase in active user numbers and a wider range of product categories [1][8] - The company's non-IFRS net profit margin improved from 6.4% in the previous year to 7.2%, with operating profit margin rising from -1% to 2%, primarily due to improvements in gross margin and administrative expense ratios [2][8] - For 2025, the management plans to increase long-term strategic investments to capitalize on structural changes in the healthcare market, expecting significant revenue and profit improvements over the next three years [2][8] Revenue and Profit Forecast - Revenue forecasts for 2025 and 2026 are set at 65.7 billion yuan and 73.5 billion yuan, respectively, with adjustments of 2.9% and 3.7% upwards due to increased consumer online purchasing behavior [3][12] - Adjusted net profit for 2025 and 2026 is projected at 4.4 billion yuan and 4.9 billion yuan, with downward adjustments of 7.9% and 3.2% due to increased investments in front warehouses and AI [3][12] Operational Data - As of H2 2024, JD Health had 184 million annual active users, a 7% year-on-year increase, indicating a user penetration rate of 27% with significant growth potential [2][9] - The average transaction value decreased year-on-year, but this was offset by an increase in shopping frequency among users [9]

Summary of JD Health Conference Call Company Overview - **Company**: JD Health - **Year**: 2024 Key Points and Arguments User Growth and Engagement - JD Health achieved 183 million active user accounts in 2024, with an average of over 498,000 online consultations per day, maintaining this level for four consecutive years [2][3] - Direct sales revenue reached 48.8 billion RMB, a year-on-year increase of over 6.9%, with strong performance in surgical services and electric scissors [2][3] Market Position and Innovations - JD Health maintains its leadership in the pharmaceutical e-commerce sector, accelerating online channel development to meet growing user demand for flu medications and personal treatment [2][5] - The company innovated in internet medical services, providing a full process from online consultation to home check-ups and prescriptions, enhancing convenience [2][5] - JD Health is the first online healthcare platform to apply large language models (LLM) on a large scale, improving doctor communication and research efficiency [2][5][6] Financial Performance - Service revenue exceeded 9.36 billion RMB in 2024, a year-on-year increase of 18.9%, accounting for 16.1% of total revenue [2][10] - The gross margin increased by 17 basis points to 22.9%, reflecting supply chain optimization efforts [10][11] Retail and Insurance Services - JD Health launched online drug purchase services using personal medical insurance accounts in 80 cities, covering over 100 million people [3][12] - The company plans to expand online medical insurance payment services in 2025, enhancing user experience and recognition [23] Technological Advancements - JD Health introduced AI solutions to support hospital applications, optimizing patient care processes and clinical research [2][6] - The company is committed to AI technology development, with top-tier AI language models available for hospitals, medical institutions, and patients [20][21] Future Strategies - In 2025, JD Health will focus on strengthening B2C direct sales, online markets, and on-demand retail operations to solidify its position as a leading online healthcare platform [8][18] - The company aims to deepen hospital service skills and enhance home service models, while investing in technology applications to create real value for the healthcare industry [8][18] Industry Trends and Responses - The Chinese healthcare market is rapidly expanding, driven by an aging population and increasing health awareness among younger generations [22] - JD Health plans to address these changes by enriching product lines, optimizing channel experiences, and integrating online and offline resources [22] Competitive Landscape - JD Health will leverage insights into user needs to optimize its business model and enhance supply chain capabilities, ensuring sustainable competitive advantages [16] Collaboration and Partnerships - The company has engaged in innovative collaborations with firms like October, MSC Helium, and Pfizer in supply chain services, patient services, and academic marketing [9][19] Customer Experience and Trust - JD Health is focused on enhancing customer trust through competitive pricing strategies and comprehensive service offerings, including free prescription drug change services and 24/7 support [19] Additional Important Content - JD Health's commitment to continuous investment in AI and big data technologies aims to maintain its leadership position in the digital health sector [14][15] - The company is exploring new growth opportunities in the specialty drug market and enhancing its academic marketing platform to attract more medical companies [19]

Financial Performance - Revenue for the year ended December 31, 2024, was RMB 58,159,881,000, representing an 8.6% increase from RMB 53,529,941,000 in 2023[4] - Gross profit increased by 12.2% to RMB 13,308,577,000, up from RMB 11,865,336,000 in the previous year[4] - Operating profit surged by 132.9% to RMB 1,469,464,000, compared to RMB 630,848,000 in 2023[4] - Annual profit reached RMB 4,157,014,000, a 94.0% increase from RMB 2,142,880,000 in the prior year[4] - Revenue increased by 8.6% from RMB 53.5 billion in 2023 to RMB 58.2 billion in 2024, driven by a 6.9% increase in product sales from RMB 45.7 billion to RMB 48.8 billion[36] - Service revenue rose by 18.9% from RMB 7.9 billion in 2023 to RMB 9.4 billion in 2024, attributed to increased digital marketing service fees due to a higher number of advertisers[36] - Annual profit increased from RMB 2.1 billion in 2023 to RMB 4.2 billion in 2024[46] - Total revenue for 2024 was RMB 58.16 billion, an increase of 8.5% from RMB 53.53 billion in 2023[70] - Gross profit for 2024 was RMB 13.31 billion, representing a gross margin of 22.9%, compared to RMB 11.87 billion and a gross margin of 22.1% in 2023[70] - Annual profit for 2024 was RMB 4.16 billion, a significant increase of 94.2% from RMB 2.14 billion in 2023[71] User Engagement and Services - As of December 31, 2024, the annual active user count reached 183.6 million, with an average of over 490,000 online consultations per day throughout the year[17] - Daily online consultation volume at the company's internet hospital exceeded 490,000 by December 31, 2024[27] - The company has established the largest online team of licensed pharmacists and nutritionists in the country, enhancing personalized health consultation services[23] - JD Health's online medical services have expanded to include nearly 40 home healthcare services, enhancing user experience[10] - The company upgraded its instant delivery service, achieving delivery times as fast as 9 minutes for consumers nationwide[9] Product Development and Innovation - The company launched nearly 30 new specialty drugs online, reinforcing its position as the first station for new specialty drug launches[20] - The company has introduced 149 rapid testing products, covering over 1.5 billion people across 12 core cities[10] - The company launched 149 home testing service products across 12 cities, providing equivalent testing services to offline medical institutions[28] - The company is actively involved in the development of AI-driven products and solutions for healthcare, including smart health assistants and AI psychological companions[16] - The company has introduced AI health assistant products and smart doctor assistant services to enhance online healthcare service experiences[30] Strategic Partnerships and Market Position - Strategic partnerships were signed with brands like Swisse and GNC to enhance product co-creation and marketing efforts, improving brand influence and sales[21] - The company is focused on building a unified online entry point for users to access quality healthcare services efficiently[16] - The company aims to strengthen its advantages in the pharmaceutical health supply chain by enhancing cost, efficiency, and user experience[14] - The company is committed to driving "technology for the public" to ensure equitable healthcare access through innovative solutions[16] Financial Position and Cash Flow - Cash and cash equivalents rose from RMB 15.0 billion in 2023 to RMB 22.6 billion in 2024, reflecting a net increase of RMB 7.4 billion[51] - Operating cash flow for 2024 was RMB 4.3 billion, compared to RMB 4.6 billion in 2023, while investment activities generated a net cash inflow of RMB 3.1 billion[52] - The net cash used in investing activities in 2024 was RMB 3.1 billion, mainly due to the maturity of fixed deposits amounting to RMB 35 billion[56] - The net cash used in financing activities decreased from RMB 117.2 million in 2023 to RMB 45.6 million in 2024, primarily due to the absence of share repurchase payments in 2024[57] - The company had no outstanding borrowings as of December 31, 2024, indicating a strong financial position[68] Operational Efficiency - Operating costs increased by 7.6% from RMB 41.7 billion in 2023 to RMB 44.9 billion in 2024, primarily due to higher sales volumes of pharmaceutical and health products[37] - Fulfillment expenses increased by 14.1% from RMB 5.3 billion in 2023 to RMB 6.0 billion in 2024, with fulfillment expenses as a percentage of revenue rising from 9.9% to 10.4%[39] - R&D expenses grew by 8.5% from RMB 1.2 billion in 2023 to RMB 1.3 billion in 2024, maintaining a stable percentage of revenue at 2.3%[42] - General and administrative expenses decreased by 29.0% from RMB 2.0 billion in 2023 to RMB 1.4 billion in 2024, with the percentage of revenue dropping from 3.7% to 2.4%[43] Assets and Liabilities - Total assets increased to RMB 71,274,993 thousand in 2024 from RMB 64,288,300 thousand in 2023, representing a growth of approximately 15%[74] - Current assets increased to RMB 58,460,415 thousand in 2024, up from RMB 47,849,891 thousand in 2023, showing a growth of approximately 22%[74] - Non-current assets decreased to RMB 12,814,578 thousand in 2024 from RMB 16,438,409 thousand in 2023, a decline of about 22%[74] - Trade receivables rose to RMB 551,370 thousand in 2024 from RMB 347,962 thousand in 2023, an increase of about 58%[87] - Trade payables increased to RMB 10,423,314 thousand in 2024 from RMB 9,660,450 thousand in 2023, reflecting a growth of approximately 8%[88] Governance and Compliance - The audit committee has reviewed the audited consolidated financial statements for the year ending December 31, 2024[94] - The company has complied with all applicable provisions of the Corporate Governance Code during the reporting period[90] - No purchases, sales, or redemptions of the company's listed securities occurred during the reporting period[96] - The annual results announcement will be published on the Hong Kong Stock Exchange website and the company's website[101]

Summary of the Conference Call on JD Health Industry Overview - The overall online penetration rate for both prescription and non-prescription drugs in the internet healthcare industry remains low, indicating significant growth potential in the market [1][2][3] - The internet healthcare industry experienced a major turning point during the COVID-19 pandemic in 2020, leading to increased online sales of prescription drugs [2] Market Dynamics - The market size encompasses all health service-related sectors, including medical health infrastructure, consumer medical services, and drug retail [3] - JD Health and Alibaba Health primarily derive their revenue from drug and non-drug retail, with a projected growth rate in the industry at a high single-digit level over the next three years [3] Supply Chain Efficiency - Traditional supply chains involve a markup rate of approximately 65% to 90% from manufacturers to end-users, while direct procurement from manufacturers reduces this to 60% to 70% [4] - The most efficient internet self-operated platforms can achieve a markup rate as low as 10% to 12%, representing a significant efficiency improvement of 50% to 80% compared to traditional models [5] Business Models - JD Health's business model includes B2C self-operated sales, advertising revenue, and O2O (online-to-offline) services, with the self-operated model being the primary revenue source [7][8] - The company has seen a revenue increase of 13% year-on-year in its self-operated business, contributing to 85% of total revenue [10] User Engagement and Supply Side - The conversion rate from JD's main platform to JD Health is a key metric, with a focus on enhancing user experience and brand loyalty [9] - The number of third-party merchants on JD Health's platform has reached nearly 80,000, with a year-on-year growth rate of approximately 122% [12] O2O Business Development - JD Health's O2O service, "JD Buy Medicine," has expanded to cover over 490 cities, achieving delivery times as fast as 9 minutes [12][13] - The integration of real-time medical insurance settlement in O2O services is expected to enhance user trust in online purchasing [13] Financial Performance and Projections - The company anticipates a revenue growth rate of around 10% over the next three years, with a projected 12% growth in 2025 driven by GMV increases [20] - For Q3 2024, JD Health expects a year-on-year growth rate of 20% to 25% for prescription drugs, 10% to 15% for health products, and 5% to 10% for medical devices [22] Regulatory Environment - The introduction of a price comparison tool for insured pharmacies reflects the recognition of online platforms' pricing advantages by regulatory bodies [17] - The integration of online medical insurance payment systems is progressing, with JD Health already implementing these services in multiple cities [21] Conclusion - JD Health is positioned for continued growth in the internet healthcare sector, with a focus on enhancing supply chain efficiency, expanding its user base, and leveraging regulatory changes to boost sales [23]

Investment Rating - The report maintains a "Buy" rating for JD Health, with a target price not specified [4]. Core Viewpoints - JD Health has entered a strategic partnership with China Resources Sanjiu, aiming to set a benchmark in the pharmaceutical retail industry through comprehensive collaboration in areas such as digital marketing and corporate social responsibility [1]. - The company has demonstrated robust growth, with Q3 2024 revenue reaching 13.302 billion yuan, a year-on-year increase of 14.8%, and operating profit soaring by 216.0% to 552 million yuan [2]. - The integration of online medical insurance services is expected to enhance market share, with JD Health already providing online insurance payment services in 12 cities, covering over 1 billion people [2]. - During the Double Eleven shopping festival, JD Health saw significant growth in various health-related product categories, with a 140% increase in sales for products targeting the elderly [3]. - The company has set ambitious sales growth targets in collaboration with several health brands, aiming for a 300% increase over the next three years [3]. Summary by Sections Strategic Partnership - JD Health and China Resources Sanjiu have signed a strategic cooperation agreement to enhance pharmaceutical retail capabilities and drive high-quality industry development [1]. Financial Performance - For Q3 2024, JD Health reported revenues of 13.302 billion yuan, a 14.8% increase year-on-year, and an operating profit of 552 million yuan, reflecting a 216.0% growth [2]. Market Expansion - The company has expanded its online medical insurance services to 12 cities, with nearly 2000 retail pharmacies connected, potentially increasing user penetration [2]. Product Growth - JD Health experienced a significant increase in sales during the Double Eleven event, with a 7.2-fold increase in order volume and nearly tripling transaction value [3]. Strategic Goals - The company aims for a 300% sales increase in collaboration with various health brands over the next three years, reflecting a trend towards diversified health consumption [3].