Ping An Healthcare and Technology Company Ltd (1833.HK) is China’s largest one-stop healthcare platform. The company, which is a subsidiary of the insurance giant Ping An, provides online medical and wellness services. With the online application ‘Ping An Good Doctor,’ the company combines mobile health and AI technology in an online health platform that covers the entire scope from medical checkups, insurances, appointments with doctors, and delivery of medication.[mepr-active membership=”1734″ ifallowed=”show” unauth=”message” unauth_message=”Please login or purchase a membership to view full text.”] Today, Ping An Healthcare has about 315m registered users and provides nearly 730 thousand medical consultations daily with its in-house team of more than a thousand medical personnel. In the first days of the corona crisis in China, the demand for Ping An Healthcare’s app increased tenfold. ‘Private Doctor Membership’ is the latest addition to the product portfolio since last August. The program offers one-stop medical services from in-house private doctors on a subscription base.
Among Ping An Healthcare’s business segments, the online medical service segment experienced the strongest growth in 2019. Revenues and gross profit grew by 109 and 130 percent, respectively. The health mall segment is the largest in terms of revenue. The segment is responsible for 57 percent of the total revenues and grew by 56 percent in 2019. The consumer healthcare and the health management and wellness interaction segment contributed each to only 23 percent of the company’s revenue.
Ping An Healthcare plans to expand into Asia by offering an English version of its app. Joint ventures with Grab, the largest O2O Internet company in Southeast Asia, and Softbank, Japan’s largest telecommunications company, will open a potential market of 300m Indonesian and 130m Japanese users for the one-stop online healthcare ecosystem platform. In the next one or two years, Ping An Healthcare could finally turn profitable. The coronavirus pandemic will boost the business of telemedicine and e-health providers such as that of Ping An Healthcare.
Ping An Healthcare was founded in 2014 and is headquartered in Shanghai. The company is listed on Hong Kong’s stock exchange since May 2018. Its shares can also be traded in Germany and the US. Major shareholder is Ping An Insurance Group with an ownership of around 41 percent. The chairman, Wang Tao, holds less than one percent. Thirty-five percent of the shares are in public hands.
With a workforce of over 2.900 employees, Ping An Healthcare reported revenues of 5.1bn RMB (716m USD) and a loss before tax of 734m RMB (104m USD) in 2019. This is an increase in revenues of 52 percent and a reduction in losses of 19 percent compared to the same period a year ago. In 2018, revenues increased by 79 percent, while losses were cut by 9 percent. Ping An Healthcare’s operating margin is still at negative 23 percent and, therefore, well below the industry average. The company’s cash reserves increased by 436 percent to 4.97bn RMB (702m USD), while lease obligations have been at 96m RMB (13.5m USD) at the end of 2019. Notably, the company does not have any outstanding bank loans and other borrowings.
Ping An Healthcare shows a solid balance sheet with good financial strength. The equity ratio is at 78 percent and the gearing, defined here as total liabilities to total equity, at 28 percent. Next earning results will be announced in early August.
Ping An Healthcare’s shares are in an uptrend since July 2019 and increased by about 280 percent in value since. And it almost doubled since the beginning of this year. The company is currently priced at 20 times sales and ten times book value. Ping An Healthcare does not pay a dividend. All ten covering analysts have a ‘buy’ or ‘strong buy’ recommendation on the stock.
Our conclusion: Ping An Healthcare shows a healthy balance sheet with excellent financial strength. The valuation is high but comes with a compounded annual growth rate for revenue of 107 percent over the last three years. The outlook for the healthcare industry in China is very positive. The market for online health applications shows a dynamic development. Ping An Healthcare is well-positioned to benefit from this megatrend. We expect that the current pandemic crisis will move the stock another 20 to 30 percent up until the end of this year.
AIS Rating: ★★★★☆
| 2017 | 2018 | 2019 | |
|---|---|---|---|
| EPS (RMB) | (1.2) | (0.97) | (0.73) |
| Change (%) | n/a | 19 | 25 |
| DPS (RMB) | n/a | n/a | n/a |
| P/E | P/E INDUSTRY |
P/B | P/CF | Equity Ratio* |
ROE | LIAB./ Equity** |
Div YLD |
|---|---|---|---|---|---|---|---|
| n/a | 40 | 10 | n/a | 78% | (9%) | 28% | n/a |
* Equity / Total Assets, ** Total Liabilities / Equity
[/mepr-active]
