JD Health has started its IPO. Like JD and Alibaba, JD Health and ali health cannot escape being compared together. Pa gooddoctor, as a new force in digital health, will also be a subject of comparison.

From the situation of the three companies, there are advantages in synergy with their parent company groups. JD Health is backed by JD, ali health is supported by Alibaba Group, and both have absolute advantages in the pharmaceutical supply chain. Additionally, they can leverage the talent and core technology of their parent companies to enhance digital empowerment. Pa gooddoctor relies on ping an insurance, and its characteristic is offline medical health services (such as expert appointments, offline referrals, etc.), which means closer collaboration with offline medical institutions.

1. Business Comparison: JD Health and ali health are more focused on pharmaceutical e-commerce.

When comparing the three companies, JD Health and ali health have similar industry positions, platform advantages, and ecological networks, both primarily focusing on pharmaceutical e-commerce. In contrast, pa gooddoctor does not have the inherent e-commerce gene advantage like the first two, primarily providing online medical services and then expanding into other areas.

Dividing and comparing the operating revenue of the three companies based on the sales of products and provided services, the revenue structure and business model of JD Health and ali health are very similar, both primarily centered on self-operated e-commerce, with core revenue coming from pharmaceutical and health product sales, while other revenue comes from online open platforms, advertising, and other services such as online medical. The sales revenue of pa gooddoctor's products is similar to its service revenue.

From the perspective of business and business models, the three are similar, all adopting B2B + B2C + O2O models, but jd health has the most comprehensive business. Backed by the jd.com supply chain system, jd health's 'Internet + medical health' industry layout is more complete than ali health and pa gooddoctor, with a broader scope of business. jd health has unique businesses such as traditional chinese medicine decoction pieces supply chain, pharmaceutical cold chain, and wholesale of pharmaceuticals/non-pharmaceuticals.

1) jd health leads in retail pharmacy business.

jd health mainly generates commodity revenue by selling pharmaceuticals and health products through self-operated businesses, with commodity revenue accounting for a major part of the company's total revenue. The company earns commissions and platform usage fees from third-party merchants that sell through the online platform.

The situation of ali health is similar to that of jd health. As of the fiscal year ending March 31, 2020, the proportion of revenue from pharmaceutical e-commerce business reached 96.96%, which is higher than that of jd health, with the pharmaceutical self-operated portion reaching as high as 84.76%.

pa gooddoctor's health mall business remains its main source of revenue, but its operating revenue proportion for the first half of 2020 was 54.95%, which did not reach the 90% proportion set by ali health and jd health. pa gooddoctor views its e-commerce business more as a supplement to online medical services.

The active users of jd health, ali health, and pa gooddoctor are 72.5 million, 190 million, and 67.3 million respectively. ali health maintains the highest annual active user count, mainly benefiting from the advantages of its parent company alibaba group, such as related traffic from Taobao and Alipay.

Although the number of active users on jd health is much lower than that of ali health, jd health's retail pharmacy business revenue is the highest among comparable companies. The retail pharmacy business revenue of jd health is 9.435 billion yuan, higher than ali health's 7.657 billion yuan, and also higher than ping an insurance's 2.902 billion yuan.

2) Online medical health service business: Ping an insurance has the highest quality of professional physicians, while ali health is more efficient than jd.com.

The purpose of jd health's online medical health service is to increase the revenue of retail pharmacies and sell premium medical services. Ali health's online medical service is dedicated to building a consumer medical industry ecosystem that includes vaccines, physical examinations, and more. Ping an insurance's online medical health service is of higher quality and mainly assists its own medical team through a self-developed AI-assisted diagnosis and treatment system, providing diversified one-stop service membership products centered around its own medical team, such as physical examinations, medical aesthetics, dental services, and standardized health services like genetic testing.

In terms of physician strength, ping an insurance has a more professional team of physicians with the highest level of professional services. Although the number of physicians at jd health and ali health far exceeds that of ping an insurance, the external physicians contracted by ping an insurance all come from tertiary grade A hospitals and hold titles of deputy chief physician or above. Overall, ping an insurance has a more professional team of physicians and the highest business revenue. Although jd health has more doctors than ali health, its average daily consultation volume is relatively low, and the overall platform efficiency is also low, presenting significant potential for future development.

II. Comparison of Financial Conditions: jd health's revenue has ranked first among comparable companies for several years.

jd health's revenue has continuously ranked first among comparable companies. In terms of operating revenue scale, all three companies show a continuous upward trend, with jd health consistently ranking first among comparable companies, with revenues of 5.553 billion yuan, 8.169 billion yuan, and 10.842 billion yuan respectively. ali health's revenue scale follows closely, gradually narrowing the gap. Meanwhile, pa gooddoctor has the smallest revenue scale, significantly smaller compared to jd health and ali health.

In terms of net income, jd health is the only profitable company. From 2017 to 2019, jd health's net income was 0.209 billion yuan, 0.248 billion yuan, and 3.44 billion yuan respectively. pa gooddoctor incurred the largest loss, while ali health's losses were relatively smaller and approached breakeven in 2019.

Regarding gross margin, the overall gross margin levels of the three companies are similar, but jd health has shown steady improvement. From 2017 to 2019, jd health's gross margin displayed an upward trend, mainly due to continuous improvements in product and service mix. In contrast, both pa gooddoctor and ali health experienced a decline in their gross margin levels.

The structural period of jd health and ali health is similar, with the main differences being in the proportion of administrative expenses and product development expenses.

Fulfillment expenditures mainly refer to logistics and warehousing service expenses, employee welfare expenses for employees participating in fulfillment activities, and other supply chain costs. According to the chart below, jd health's fulfillment expenditure ratio is lower than that of ali health, but jd.com’s revenue is higher than ali health, indicating that jd health's supply chain management is significantly better than that of ali health.

Research and development expenditures primarily include the expenses for technology and traffic support services provided or allocated, employee welfare expenses for R&D personnel, and other technical infrastructure expenditures. In 2019, jd health's R&D expenditures were 0.338 billion yuan, while ali health's were 0.219 billion yuan. As jd health expands its technical team, enhances data analysis capabilities, and develops new features and applications, R&D expenses will continue to grow.

jd health's sales expense ratio is the lowest among comparable companies. From 2017 to 2019, jd health's sales expense ratios were 4.65%, 4.80%, and 6.88%, primarily due to jd health having the largest revenue scale among comparable companies, generating significant economies of scale, resulting in a relatively low sales expense ratio.

jd health's management expense ratio is also the lowest among comparable companies. From 2017 to 2019, jd health's management expense ratios were 1.93%, 1.64%, and 1.15%, mainly reflecting that jd health's supply chain management is superior to other comparable companies.

Summary

1. JD Health, relying on jd.com, has an absolute advantage in the pharmaceutical supply chain compared to comparable companies. Although alibaba health has 2.6 times more active users than jd health, jd health's revenue from 2017 to 2019 was the highest among comparable companies, mainly because jd health can effectively monetize users, and jd has significant advantages in supply chain management.

2. In terms of net income, jd health is the only company among comparable ones that is profitable. This is primarily due to the company's low sales expense ratio and management expense ratio. On one hand, the company has good cost control, and on the other hand, the company has achieved a certain scale effect, which has diluted its associated costs.