Date: October 14, 2024
Broker: UOB Kay Hian
Company Overview
Ping An Healthcare and Technology Company (PAGD), incorporated in 2014, is a leading online healthcare service provider in China. As of the report date, the company’s shares trade on the Hong Kong Stock Exchange under the ticker 1833 HK. PAGD has a market capitalization of HK$14.5 billion (US$1.87 billion) with a 3-month average daily turnover of US$10.7 million.
The company operates two strategic business segments: the F-end, which serves financial customers, and the B-end, which serves corporate clients. It also has a significant focus on senior care services.
Stock Data
- Share Price: HK$13.00
- Target Price: HK$17.00
- Upside: +30.7%
- Market Cap: HK$14.5 billion
- Major Shareholder: Ping An Group (39.4%)
Financial Performance
The company’s 2022 turnover was RMB 6.2 billion, decreasing to RMB 4.67 billion in 2023. PAGD anticipates slight revenue growth in 2024, with estimates reaching RMB 4.69 billion. However, it expects significant revenue growth in 2025, driven by strategic upgrades and AI integration, projecting turnover of RMB 5.4 billion in 2025 and RMB 6.2 billion in 2026.
- EBITDA: Expected to shift from a negative RMB 647.4 million in 2023 to a positive RMB 60.4 million in 2025.
- Net Profit: From a reported loss of RMB 640 million in 2022, PAGD expects to turn profitable with RMB 146 million in 2024, rising to RMB 378 million by 2026.
- Revenue Growth Projections: A 14.8% compound annual growth rate (CAGR) from 2024 to 2026 is forecasted.
Key Business Segments
Strategic Businesses (F-end and B-end)
PAGD’s strategic businesses are projected to be key revenue drivers moving forward. The company reported double-digit revenue growth of 19.7% year-on-year in 1H24, with financial customers (F-end) growing by 3.4% and corporate clients (B-end) by 58.8%.
- F-end: PAGD had 26 million paying users by the end of 2023, with a penetration rate of around 11% in Ping An Group’s 234 million retail financial customers. The company sees room for further growth, aiming for a long-term penetration rate of 50%.
- B-end: PAGD served 1,748 corporate clients as of June 2024, a 3% penetration rate in Ping An Group’s 56,000 corporate clients. The long-term goal is to achieve 10-20% penetration.
Senior Care Services
In 1H24, PAGD separated its senior care services into an independent business unit, posting revenue growth of 204.8% year-on-year. The services cater mainly to Ping An Life Insurance’s F-end users, offering over 600 home-based senior care services across 64 cities in China.
The 3-in-1 senior care concierge system, launched in 2H23, covers scenarios including medical care, housing nursing, and elderly entertainment. The company is optimistic about the segment’s future, forecasting revenue of RMB 100 million in 2024 and a 45% CAGR from 2024-2026, with long-term gross margins expected between 30-40%.
AI Integration and Technology
PAGD continues to enhance its service offerings with AI-driven technologies. In 1H24, the company launched the Ping An Medical Master, a large multi-modal medical AI model capable of covering 37,000 diseases and 1.43 million doctors. The company’s AI-assisted services have increased operational efficiency, with a 30% rise in family doctor service efficiency and a 90% improvement in chronic disease management.
PAGD’s AI integration has also enhanced customer satisfaction, achieving a 98% satisfaction rate for online consultations in 1H24. The adoption of AI technology is expected to further improve profit margins and drive operational efficiency in the coming years.
Financial Strength and Profitability Outlook
The company ended June 2024 with a cash balance of RMB 3.0 billion and no bank borrowings. Available funds, including short-term investments, amounted to RMB 12.6 billion by the same period, positioning the company well for future expansion and operational stability.
PAGD expects its profitability to improve continuously, targeting a 35% gross margin and double-digit net margin in the long term. The company’s efforts in cost control, AI empowerment, and expanding high-margin businesses are key contributors to this optimistic outlook.
Risks
The report highlights several potential risks for PAGD, including:
- Changes in sector policies
- Intensifying competition
- Weaker-than-expected economic conditions
- Risks related to connected party transactions
Valuation
PAGD is currently trading at 2.4x 2025F P/S and 40.5x 2025F PE, which is 1.3 standard deviations below its mean. The broker maintains a BUY recommendation with a target price of HK$17.00, supported by the company’s long-term growth prospects, strategic business expansion, and AI-driven operational improvements.
