Investment Rating - The report assigns a Buy rating to Alibaba Health (ALH) and a Neutral rating to JD Health (JDH) [2][3]. Core Insights - The China Online Health sector is expected to stabilize after an 80% share price correction since 2021, with revenue growth projected at mid-teens to 20% year-on-year from 2020 to 2024, alongside improved visibility on earnings per share (EPS) revisions [2][3][11]. - The report identifies three key debates: competition in pharmacy eCommerce, profitability and capital allocation strategies, and the sales/earnings revision cycle for both ALH and JDH [2][14]. Summary by Sections Investment Thesis and Price Targets - Alibaba Health is resumed at a target price of HK30, indicating a 22% upside potential, with expected sales and operating profit CAGRs of 18% and 26% respectively [3][11]. Market Overview - The online health market is projected to reach RMB 360 billion in GMV by 2023, with a CAGR of 16% from 2023 to 2026, driven by healthcare digitalization and supportive policies [7][22]. - The penetration of the drug category is expected to increase from 7% to 10% by 2026, indicating significant growth potential [7][22]. Competitive Landscape - Both ALH and JDH are expected to maintain competitive advantages through scale benefits, supply chain efficiency, and strong advertising support from their parent companies [2][3][11]. - The online pharmacy sector is characterized by intense competition, with both companies competing against offline pharmacies and new entrants in the online space [22][31]. Profitability and Capital Allocation - ALH is expected to achieve higher margin visibility over the next two years, with an estimated operating profit margin (OPM) increase of 360 basis points [3][11]. - JDH's margins are projected to remain flat in the near term due to investments in pricing promotions and supply chain improvements [3][11]. Growth Drivers - Key growth drivers for ALH include user penetration from its parent company, improvements in average revenue per user (ARPU), and a focus on non-drug categories with higher margins [12][13]. - JDH is expected to leverage its strong supply chain and logistics capabilities to maintain its market position, with a focus on onboarding new drugs and enhancing its online-to-offline (O2O) delivery model [12][13]. Earnings Revision Cycle - The report suggests that the downward revision cycle for the sector is nearing its end, with expectations of revenue growth re-accelerating in the second half of 2024 [22][31].
高盛：互联网和在线健康负面修正周期结束; 重启对健康(买入评级)和京东健康(中性评级)的覆盖