HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Equity Capital Markets

Deshengtang Pharmaceutical Co Ltd / Equity Capital Markets

<ul>
<li>Due to COVID-19, the consumption pattern of customers has changed.The rapid development period of pharmacies is coming to an end and the industry has entered a new era of integration.</li>
<li>The essence of Deshengtang's business model is more like traditional retail offline pharmacies, relying heavily on selling drugs. The Company's healthy gross margin gives hope for an early turnaround. </li>
<li>However, no matter from which field to seek expansion, Deshengtang would encounter strong competitors.It remains to see if Deshengtang can survive in the industry rather than be acquired by competitors.</li>
</ul>


Due to COVID-19, the consumption pattern of customers has changed.The rapid development period of pharmacies is coming to an end and the industry has entered a new era of integration.
The essence of Deshengtang's business model is more like traditional retail offline pharmacies, relying heavily on selling drugs. The Company's healthy gross margin gives hope for an early turnaround. 
However, no matter from which field to seek expansion, Deshengtang would encounter strong competitors.It remains to see if Deshengtang can survive in the industry rather than be acquired by competitors.


Pre-IPO Deshengtang Pharmaceutical - Benign Development Momentum, but Still Face Some Risks

Equity Bottom-Up

Alibaba Health Information Tec / Equity Bottom-Up

<ul>
<li>Against a backdrop of slowing revenue/active users growth, a return to profit in FY2023, while welcome, is shaky.We think Alibaba Health's growth would continue to slow down in the future.</li>
<li>The low gross profit and strong regulatory characteristics of drug sales indicate that <a href="https://www.smartkarma.com/entities/alibaba-health-information-technology-ltd" target="_blank" data-smartkarma-citation="entities:453:1" rel="noopener">Alibaba Health Information Technology (241 HK)</a> is difficult to replicate the scale effect brought by traditional internet platforms. </li>
<li>The current business model and revenue structure have already made Alibaba Health lack imagination space.From a comprehensive perspective, its valuation should be lower than JD Health but higher than PAGD.</li>
</ul>


Against a backdrop of slowing revenue/active users growth, a return to profit in FY2023, while welcome, is shaky.We think Alibaba Health's growth would continue to slow down in the future.
The low gross profit and strong regulatory characteristics of drug sales indicate that Alibaba Health Information Technology (241 HK) is difficult to replicate the scale effect brought by traditional internet platforms. 
The current business model and revenue structure have already made Alibaba Health lack imagination space.From a comprehensive perspective, its valuation should be lower than JD Health but higher than PAGD.


Alibaba Health Information Technology (241.HK) FY2023 - A Slowdown in Future Growth Seems Inevitable

Thematic (Sector/Industry)

<ul>
<li>China's retail pharmacy market has entered a new era of integration as the industry growth is slowing down. After JD Health/Alibaba Health enter this industry, the game rule changes. </li>
<li>In the short term, the offline chain pharmacies, JD Health, Alibaba Health, etc. would still have the opportunity to carve up market share under the trend of prescription outflow.</li>
<li>In the long term, it depends on who're the first to establish new omni-channel retail scenarios, because the "new retail" model would comprehensively surpass traditional model from cost to experience.</li>
</ul>


China's retail pharmacy market has entered a new era of integration as the industry growth is slowing down. After JD Health/Alibaba Health enter this industry, the game rule changes. 
In the short term, the offline chain pharmacies, JD Health, Alibaba Health, etc. would still have the opportunity to carve up market share under the trend of prescription outflow.
In the long term, it depends on who're the first to establish new omni-channel retail scenarios, because the "new retail" model would comprehensively surpass traditional model from cost to experience.


China Retail Pharmacy Industry - New Game Rule, New Challenges, New Outlook

Asia Pac IPO & Placement Research, China biotech, Aequitas Research

Ke Yan, CFA, FRM

Asia Pac IPO & Placement Research, China biotech

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Quantitative Analysis

<ul>
<li>We analyze the monthly Shanghai/Shenzhen northbound Connect flows with our data engine.</li>
<li>We estimate that the total inflows were USD 1.5bn last Month. Industrials, Information Technology, Consumer Staples led the inflows.</li>
<li>We highlight flows for CATL, Hundsun, Ping An Insurance, Inovance, Xinghuacun Fen Wine, Shaanxi Coal, Midea, Tongwei, BYD, Eve Energy, Industrial Bank.</li>
</ul>


We analyze the monthly Shanghai/Shenzhen northbound Connect flows with our data engine.
We estimate that the total inflows were USD 1.5bn last Month. Industrials, Information Technology, Consumer Staples led the inflows.
We highlight flows for CATL, Hundsun, Ping An Insurance, Inovance, Xinghuacun Fen Wine, Shaanxi Coal, Midea, Tongwei, BYD, Eve Energy, Industrial Bank.


Northbound Flows Monthly (Feb): CATL, Hundsun, Ping An Insurance, Inovance, Xinghuacun Fen Wine

<ul>
<li>We analyze the monthly Shanghai/Shenzhen northbound Connect flows with our data engine.</li>
<li>Consumer Staples, Financials, Health Care led the inflows while Industrials , Information Technology led the outflows.</li>
<li>We highlight inflows into Wuliangye, Moutai, Ping An Insurance, China Tourism, Shenzhen Mindray,  and outflows from Yunnan Energy New Material, BJ-SH HSR, Nari Technology, Goertek.</li>
</ul>


We analyze the monthly Shanghai/Shenzhen northbound Connect flows with our data engine.
Consumer Staples, Financials, Health Care led the inflows while Industrials , Information Technology led the outflows.
We highlight inflows into Wuliangye, Moutai, Ping An Insurance, China Tourism, Shenzhen Mindray,  and outflows from Yunnan Energy New Material, BJ-SH HSR, Nari Technology, Goertek.


Northbound Flows Monthly: $4.6bn of Inflows

China

Yifeng Pharmacy Chain Co., Ltd. operates as a chain of retail stores that specialize in pharmaceutical and over the counter remedies and personal care products.

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Yifeng Pharmacy Chain (603939 CH)

Pre-IPO Deshengtang Pharmaceutical - Benign Development Momentum, but Still Face Some Risks

Deshengtang has hope for an early turnaround if benign development momentum could continue. But its business model does not have a high moat, so...

Xinyao (Criss) Wang

Alibaba Health Information Technology (241.HK) FY2023 - A Slowdown in Future Growth Seems Inevitable

Alibaba Health saw a performance turnaround in FY23, but it would slow down due to slowing revenue/user growth. The current business model lacks...

Xinyao (Criss) Wang

China Retail Pharmacy Industry - New Game Rule, New Challenges, New Outlook

China's retail pharmacy market has entered a new era with new game rule.As industry growth is slowing down, which companies are the first to...

Xinyao (Criss) Wang

Northbound Flows Monthly (Feb): CATL, Hundsun, Ping An Insurance, Inovance, Xinghuacun Fen Wine

We analyzed the Shanghai/Shenzhen Connect Scheme for February and highlight flows for CATL, Hundsun, Ping An Insurance, Inovance, Xinghuacun Fen Wine.

Ke Yan, CFA, FRM

Northbound Flows Monthly: $4.6bn of Inflows

We analyzed the Shanghai/Shenzhen Connect Scheme for December and highlight flows for Wuliangye, Moutai, Ping An Insurance, China Tourism, Shenzhen...

Ke Yan, CFA, FRM

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