Huajing Securities·2024-03-28 16:00Investment Rating - The report maintains a "Buy" rating for JD Health with a target price adjusted to HK$43.57 from HK$59.84, reflecting a 54% upside potential from the current price of HK$28.35 [1][2][13]. Core Insights - JD Health's profit growth in 2023 exceeded market expectations, driven by improved operational efficiency and increased interest income, with a reported profit of RMB 2.14 billion, a 459% year-on-year increase [1][9]. - The company anticipates a return to normal growth in product revenue starting in 2024 as the impact of the pandemic diminishes, projecting a year-on-year growth rate of 15% for product sales from 2024 to 2026 [1][12]. - Service revenue is expected to grow rapidly, with projections of 22% year-on-year growth in 2024, 18% in 2025, and 17% in 2026, supported by an increase in third-party merchants and enhanced retail capabilities [1][12]. Financial Performance Summary - In 2023, JD Health achieved total revenue of RMB 53.53 billion, a 14.5% increase year-on-year, with a gross profit margin of 22.2%, up 1 percentage point from the previous year [1][9]. - The company reported a significant increase in operating profit to RMB 890 million, a 2383% year-on-year rise, indicating improved operational efficiency [1][9]. - For 2024, the revenue forecast is set at RMB 62.19 billion, with a projected gross profit of RMB 14.15 billion and a net profit of RMB 2.73 billion [11][18]. Revenue Breakdown - Product revenue for 2023 was RMB 45.65 billion, with expectations of RMB 52.61 billion in 2024, reflecting a 3% increase from previous estimates [12][18]. - Service revenue is projected to decline to RMB 9.57 billion in 2024, a 23% decrease from earlier forecasts, indicating a shift in revenue dynamics [12][18]. Valuation Metrics - The target price corresponds to a 2.0x price-to-sales ratio for 2024, which is above the industry average of 1.4x for comparable internet healthcare platforms [2][13]. - The report highlights JD Health's active customer base and higher third-party commissions as justifications for a premium valuation compared to peers [2][13].