HAITONG INT'L: JD HEALTH (06618) revenue and profit for 24 years exceed expectations, optimistic about AI medical and O2O scene construction.

HAITONG INT'L released a research report stating that JD HEALTH (06618) is expected to slightly exceed market expectations in terms of revenue and significantly exceed market expectations in terms of profit for 2024. The company achieved revenue of 58.2 billion yuan in 2024 (+8.6%). Apart from the first quarter of 2024 when the epidemic had a high base, the revenue for the remaining three quarters saw double-digit year-on-year growth (2Q 14.6%, 3Q 14.8%, 4Q 11.3%). During the same period, the company achieved an adjusted net profit of 4.8 billion yuan (+15.9%), significantly surpassing market expectations, mainly due to the release of economies of scale, with a net profit margin reaching 8.2% (+0.5pp). With the company's strong supply chain, selection, and operational capabilities, JD HEALTH is expected to become the first company in the industry to validate the self-operated O2O business value. HAITONG INT'L pointed out that the Internet healthcare industry will benefit from the advancement of online personal medical insurance policies, leading to sustained improvement in market sentiment. By the end of 2024, JD HEALTH had opened medical insurance personal account payment services in 18 cities including Shanghai, Beijing, Guangzhou, Shenzhen, Foshan, Chengdu, Zhengzhou, Panyang, and Tianjin, with access to over 3,000 nationally designated medical insurance pharmacies. The bank believes that in the fourth quarter alone, the three major categories of drugs, equipment, and health products all showed strong growth, with a revenue of 16.5 billion yuan (+11.3%) in 24Q4. Despite a certain base effect from the fourth quarter of 2023 related to the flu, the company focused on launching new drugs and enhancing platform brand building, resulting in strong growth in drug sales, and steady growth in health products and medical equipment. Looking back at the past 12 quarters, the revenue scale in 24Q4 had already exceeded the peak of the epidemic in 22Q4 (16 billion yuan). The bank predicts that the revenue certainty of the company in 2025 will be stronger, and the market share of categories is expected to continue to increase. The bank also mentioned that the growth in the number of merchants has initially translated into performance, and the platform ecosystem with the features of "complete products," "low prices," and "high quality" has been further strengthened. In the revenue structure of the company in 2024, product revenue was 48.8 billion yuan (+6.9%); platform, advertising, and other services revenue was 9.4 billion yuan (+18.9%). Product revenue and service revenue accounted for 83.9% and 16.1% of total revenue, respectively. The rapid growth of service revenue is attributed to the growth in digital marketing services and the increase in the number of platform merchants. From 2022 to 2023, the number of company merchants surged from over 20,000 to over 50,000, and further reached over 100,000 in 2024. After 1-2 years of cultivation, the growth in the number of merchants has initially translated into service revenue. Based on the trend of increasing platform merchant numbers in 2024, the bank predicts that the platform scale may rapidly expand in the next 1-2 years, leading to growth in high-margin businesses such as digital marketing. The bank remains optimistic about platforms with a large number of sticky users and the development of new AI scenarios in the healthcare field. By the end of 2024, the annual active user count of the company had grown to 180 million (+6.6%), with an average daily online consultation volume exceeding 490,000 (+8.9%). The company has open-sourced its medical large model "Jingyi Qianxin" to promote the deployment of AI technology in the industry in a transparent manner, accelerating the application of natural language models and intelligent bodies in the healthcare field. Additionally, the bank predicts that offline pharmacies will become an important leverage for the company to expand traffic and extend platform value in the future. By the end of 2024, the company had opened nearly 60 self-operated O2O stores in Beijing, covering most users in the area.