Core views:
Event: JD Health announced its 24-year interim results. In 24H1, the company achieved revenue of 28.344 billion yuan (RMB, same below), with a year-on-year increase of 4.6%. Among them, the pharmaceutical and health products sales business (pharmaceutical e-commerce proprietary business) achieved revenue of 23.91 billion yuan, an increase of 3.2% year on year; platforms, advertising and other services achieved revenue of 4.434 billion yuan, an increase of 12.5% year on year, mainly due to the increase in the number of 3P merchant advertisers. On the profit side, 24H1, the company achieved net profit of 2.037 billion yuan, an increase of 30.5% year on year; non-IFRS net profit of 2.644 billion yuan, up 8.5% year on year, and non-IFRS net margin increased 0.3 pct to 9.3% year on year. Looking at a single quarter, in 24Q2, JD Health achieved revenue of 15.1 billion yuan, a year-on-year increase of 14.6%. After gradually breaking away from the influence of a high base, it achieved steady growth in the second quarter.
Accelerating the entry of merchants has led to healthy growth in 3P business and advertising revenue, and continues to promote the O2O business layout. As of 24H1, the number of merchants on the platform had grown to 0.08 million, JD's instant drug purchase service covered more than 490 cities, and more than 0.15 million partner pharmacies. At the same time, the company has responded positively to policy guidance. According to JD Health's official account, JD Health has now launched online medical insurance payment services in Beijing, Shanghai, Guangzhou, Shenzhen, and Dongguan. We believe that the gradual opening of online health insurance is expected to help the platform cover more users and further increase the penetration rate.
Profit forecasting and investment advice. JD Health continues to attract merchants from three parties to expand the platform's SKU. More product choices and low price strategies jointly drive the growth in the number of platform users. Assuming a year-on-year increase of 9% and 8% of active users in 24-25, the per capita expenditure is expected to be basically the same year-on-year in 24-25, taking into account the expansion of the number of users and the Group's low price strategy. The company's revenue for 24-25 is estimated to be 57.38 billion yuan and 62.651 billion yuan. Considering the company's stable position as a leader in pharmaceutical e-commerce, profitability is expected to increase further under the scale effect. The company was given a PS valuation of 1.8 times in 2024, corresponding to a reasonable value of HK$35.34 per share, maintaining a “buy” rating.
Risk warning. The direction of policy development is uncertain; market competition exceeds expectations; development of new categories and services has not achieved the expected benefits; the platform and O2O business face risks associated with third party merchants.