The Zhitong Finance App learned that UBS (UBS), a major international bank, recently released a research report setting a target price of HK$20 for Ping An Good Doctor (01833), stressing that the company's 2023 performance was in line with expectations, that the steady progress of Strategy 2.0 reduced losses rapidly, and that steady growth in the F-side business was compounded by rapid B-side business growth. UBS commented in the research report that the company achieved revenue of 4.7 billion yuan in 2023, which is in line with market expectations; net loss in 2023 and net loss after adjustment under non-IFRS standards were 335 million yuan and 315 million yuan respectively, which is a sharp drop from losses of 640 million yuan and 887 million yuan in the same period last year, and the data are better than the general expectations of the market.
UBS said in the research report that the key points of implementing the Safe Doctor Strategy 2.0 include: 1) non-core business adjustments will be basically completed in mid-2023; 2) by 2023, TO-F and TO-B businesses will achieve steady growth (15% and 81% year-on-year growth, respectively); 3) the corporate break-even balance may arrive early.
UBS wrote in the research report that in 2023, F-side revenue was about 2.2 billion yuan (47% of total revenue), a steady increase of 15% over the previous year, and an increase of 5% over the first half of the year. UBS said that the increase was mainly due to the increase in the penetration rate of Ping An Finance customers (life insurance, health insurance, property insurance, etc.) and the increase in ARPU (7.5% year-on-year increase). UBS said that considering the synergy between retirement services and the group's insurance business, as well as the relatively high ARPU (close to 1,600 yuan in 2023), it is expected that retirement services will become an important driving force for the F-side business in the long term.
The revenue of the B-side business was about 1.1 billion yuan (23% of total revenue), up 81% year on year, and increased 40% year on year in the second half of the year. UBS said that according to management expectations, the company's penetration rate of the Group's financial and corporate customers is currently 11% and 3%, respectively, and there is still a lot of room for growth. UBS said that the year-on-year increase in GPM was 5 percentage points to 32.3%, mainly as a result of adjustments to non-core businesses. UBS also said that due to business adjustments, better cost discipline measures, and efficiency improvements, SG&A expenses declined year over year, so net loss narrowed to around 4% of sales in the second half of 2023.
UBS wrote in the research report that management expects the F-side business to maintain a steady pace of growth, while the B-side business will maintain a rapid growth momentum. UBS said that after business adjustments, gross margin may have reached a stable state, and there is still some room for improvement through product upgrades and scale expansion. UBS also wrote in the research report that with the continuous improvement of operating efficiency, management expects to achieve break-even soon, and aims to achieve a long-term net profit margin of about 15%.
In terms of the target price, UBS gave Ping An Good Doctor a target price of HK$20.0. UBS wrote in the research report that factors that may spur a stronger upward trend in Ping An Good Doctor's stock price include: 1) corporate customers are growing faster than expected; 2) wider adoption of its family doctor membership program; 3) ARPU is growing faster than expected due to additional sales and good awareness of its service products; 4) easing of online medical regulations and compensation support for national basic health insurance funds.