Succeed $JD HEALTH (06618.HK)$ After that, $DINGDANG HEALTH (09886.HK)$ This was followed by the disclosure of the semi-annual report.

In the first half of 2024, Dingdang Health's revenue was 2.271 billion yuan, up 0.92% year on year, down 12.03 percentage points from the same period in 2023; net loss for the same period was 0.084 billion yuan, a decrease of 24.95% year on year.

As residents' lives return to a normal pace, a slowdown in pharmaceutical e-commerce revenue is inevitable.

How Dingdang Health should face the new situation after a slowdown in growth is a test for management.

Looking at it now, Dingdang Health is saving resources.

On the one hand, Doraemon Health is still trying to control costs. Costs decreased by 3.1% year-on-year in the first half of 2024;

On the other hand, Dingdang Health continues to increase its offline smart pharmacies and expand its distribution business to broaden the scale of revenue.

The actual results are yet to be tested.

Excluded from the Hang Seng Composite Index

In the pharmaceutical e-commerce industry, where the giants of Ali, JD, and Ping An are piled up, Jingdang Health is indeed “not easy to live.”

Despite not holding onto the giant's thighs, Dingdang Health broke through the siege by becoming a partner merchant on e-commerce platforms such as Are You Hungry or Meituan.

Today, the growth rate of Jingdang Health's performance is gradually slowing down.

In the first half of 2024, Dingdang Health's revenue was 2.271 billion yuan, up 0.92% year on year, down 12.03 percentage points from the same period in 2023.

The fast medicine business, which supports the bulk of Dingdang Health's revenue, has cooled down somewhat. Revenue generated in the first half of 2024 was 2.21 billion yuan, up 1.2% year on year, down 12.2 percentage points from the same period in 2023.

Although the epidemic gradually receded in 2023, due to various factors such as influenza, patients' demand for drug purchases showed a strong trend, which brought room for growth in the performance of many pharmaceutical e-commerce companies such as Dingdang Health.

However, as the effects of influenza and the like waned, online demand showed a downward trend.

Slowing down is probably becoming the norm in the industry.

In the first half of 2024, JD Health's revenue was 28.804 billion yuan, up 6.04% year on year, down 27.2 percentage points from the same period in 2023. This is the first time since JD Health's semi-annual report went public that the revenue growth rate fell to single digits.

In such a general environment, revenue pressure is an inevitable result.

Some online pharmaceutical e-commerce businesses have improved their profit levels by optimizing their product portfolios. For example, JD Health increased profit margins by seizing the right to launch innovative drugs with higher unit prices from customers.

JD Health's non-IFRS profit for the first half of 2024 was 2.644 billion yuan, up 8.54% year on year; profit margin for the same period was 9.18%, up 0.21 percentage points year on year.

In contrast, Dingdang Health, which is still at a loss, faces greater pressure to introduce new drugs.

In the first half of 2024, Dingdang Health's non-IFRS net loss still reached 0.039 billion yuan, a year-on-year reduction of about 10%.

In April of this year, Dingdang Health launched Sanofi's new drug “Xilida,” but as early as March, JD Health took the lead in seizing the right to launch the drug online.

Currently, Jingdang Health has relatively strict cost control.

In the first half of 2024, the cost of Dingdang Health was 1.516 billion yuan, a year-on-year decrease of 3.1%. The gross margin for the same period was 33.1%, 9.5 percentage points higher than JD Health.

“The reduction in revenue costs is mainly due to increased efficiency in the procurement system and changes in the product sales mix.” Jingdang Health pointed out.

In order to expand the network of offline smart pharmacies, Dingdang Health is still generous in spending on sales expenses.

In the first half of 2024, sales expenses could reach 0.486 billion yuan, accounting for 21.4% of revenue, 16.4 percentage points higher than JD Health.

“This increase is mainly due to the expansion of the smart pharmacy network and increased sales and marketing activities.” Jingdang Health pointed out.

On the B-side, where fundamentals did not perform well enough, the pressure on Jingdang Health's secondary market soared.

At the close of trading on August 19, Jingdang Health's decline reached 19.09%.

The main reason is related to the Hang Seng Index's exclusion expectations. According to the quarterly inspection results, Dingdang Health will be removed from the Hang Seng Composite Index on September 9.

CICC believes that Dingdang Health may have been removed from Hong Kong Stock Connect due to declining market capitalization and insufficient liquidity.

Healthcare companies excluded from the Hang Seng Composite Index along with Dingdang Health also include Junshi Biotech (1877.HK), Xintong Healthcare (2160.HK), Shengnuo Pharmaceuticals (2257.HK), and Cansino (6185, HK).

On the afternoon of August 19, Junshi Biotech responded that its H shares as Hong Kong Stock Connect shares were not affected by the Hang Seng Composite Index adjustment.

2B supplier

Whether it can continue to increase the scale of income may be the driving force for Jingdang Health to escape losses in the future.

The much-anticipated incremental space now comes from the policy side. Beginning in July of this year, Beijing and other places have loosened medical insurance payments for online drug purchases.

Currently, in Beijing, Shanghai, Shenzhen, and Foshan, Dingdang Health has been selected as the first batch of online health insurance payment merchants to be piloted or supplied by the first batch of platforms.

The market is waiting to see how much incremental room can be brought to Dingdang Health by paying online for medical insurance and drug purchases.

Jingdang Health is not satisfied with selling drugs directly to consumers; it continues to advance the B-side business.

According to channel division, Dingdang Health's fast medicine business can be divided into three parts: direct online management, distribution to merchants, and offline retail.

Online direct sales are the main source of revenue. Revenue generated 1.613 billion yuan in the first half of 2024, accounting for 71.03%, but growth has stagnated, with a year-on-year increase of only 0.44% in the first half of this year.

Compared with the online direct management business, the revenue of Dingdang Health's distribution business to merchants increased significantly. The first half of 2024 generated revenue of 0.274 billion yuan, an increase of 11.5% over the previous year.

The distribution business is the sale of pharmaceuticals to merchants, which then sell them abroad.

To a certain extent, this may constitute potential competition with Dingdang Health's online direct sales business.

For example, if Dingdang Health sells similar drugs to other merchants, the latter sets lower terminal retail prices, it may generate “internal affairs” with Dingdang Health's direct business.

“We distribute our products through independent distributors over which we have limited control, and sales through our direct channels may compete with the business of such distributors, and there is a risk of encroachment upon them.” Jingdang Health pointed out.

However, once the distribution business starts, it is possible to bring large-scale revenue to Dingdang Health.

Take Pharmacist Gang (9885.HK) as an example. The platform aggregates different types of drugs, directly targets the pain point that single pharmacies and primary medical institutions lack sufficient bargaining power for upstream dealers when purchasing small-batch drugs, reducing procurement costs for such groups. Revenue reached 16.974 billion yuan in 2023.

The market continues to pay attention to whether Dingdang Health can achieve both the B-side and the C-side.