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In the first month of 2024, under the influence of external macro policies and geopolitics, the domestic A-share and Hong Kong stock capital markets remained in the doldrums, showing a rare continuous decline, causing investors to panic.

The decline of major A-share indices has led to a lack of money-making effect, and the confidence of southward funds has been severely tested. For the whole of January, the Hang Seng Index fell 9.16% and the Hang Seng Technology Index fell 19.51%.

Rationally, crises usually breed new opportunities. For investors, the current market has been severely oversold, which may be a good time to buy quality companies on dips.

The Hong Kong stock Internet medical sector is an example. According to Futuo Niuniu data, the Hong Kong Internet medical sector fell as much as 33.50% in January 2024, far exceeding the 9.16% decline in the Hang Seng index.

Data source: Futu Niuniu

At the level of individual stocks, a large number of high-quality head enterprises will inevitably be affected, in a serious overfall state, the margin of safety is highlighted. For example, Safety and Health (1833.HK) fell by as much as 37.05 per cent in just one month.

The fluctuation of the market is temporary, while the long-term value of high-quality enterprises is unchanged. You might as well discuss the performance of Ping an Health in the Internet medical plate. Is the future worthy of attention?

"C side" vs "B side + F side", two paths to the development of business model

First of all, from the perspective of the growth path of the industry, under the rapid development of science and technology and the increasingly diverse needs of consumers in recent years, the way of playing is constantly changing and moving towards different business models.

Among them, pharmaceutical e-commerce enterprises, represented by JD.com Health and Ali Health, continue to make efforts at the C end, mainly providing consumer services for medical and health products. On the other hand, Ping an Health chose a different path of development. Since Ping an Health put forward the 2.0 deepening strategy in 2021, the company has gradually shifted its business focus from C to B and F, and strived to build a "managed medical care + family doctor membership + O2O medical and health service" model around family doctors as the core hub.

Different business models also reflect the different development paths of Internet medical enterprises.

Judging from the results, the gross profit margin of pharmaceutical e-commerce enterprises rose steadily and began to make a profit in the first half of 2023. According to WIND data, in the first half of 2023, JD.com 's gross profit margin of health was 22.9%, an increase of 1.1 pctdome Nonmurf IFRS net profit of 2.7 billion yuan, an increase of 34% over the same period last year. Ali Health had a gross profit margin of 22.1% in the first half of 2023, an increase of 2.1% over the same period last year, with a net profit of 640 million yuan and 83% year-on-year growth. As Ping an Health is still in the deepening period of transformation, it was still in a state of loss in the first half of 2023, but the loss significantly narrowed by 42%, and its gross profit margin was also significantly higher than that of the two pharmaceutical e-commerce companies, reaching 32.2%, an increase of 5.6pct over the same period last year.

From the perspective of long-term development, the market prospects faced by the two business models are also different.

For pharmaceutical e-commerce, the main users are mainly Internet users, and the market competition is more fierce. From the past financial data, it can be seen that head pharmaceutical e-commerce companies are relying on economies of scale to increase the active user base. However, from the perspective of market scale, the growth of Internet users in China has entered a plateau, and the future C-end total market will become an era of stock competition, with problems such as high user costs and low benefits.

For the enterprises aiming at the B-end enterprise medical and health management market, the market competition pattern is more friendly, and the blue ocean market is imaginative.

Li Zhouli, vice president and secretary-general of the Health Insurance Service Branch of the China Health Management Association, said that according to the relevant data of the Seventh National Census, the working-age population in China is 880 million, most of whom are office workers. They spend 2/3 of their time at work. Enterprises provide comprehensive health protection for their employees, which is a very important measure for the country to implement the grand health strategy.

According to the 2023 White Paper on Chinese Enterprise Medical and Health Management released by Yiou think-tank, employees in Chinese enterprises lose as many as 9 working days a year due to illness, while 53% of employees are affected by health problems. However, at present, enterprises' ability to pay for health management services is still weak. According to research data from 2021 and 2022, less than 30 per cent of the companies surveyed currently limit their welfare investment to more than 10 per cent of total compensation. This shows that the medical and health management of enterprises in China covers a wider range of people, and the current market penetration is still at a low level, which has great potential for development and imagination.

Accelerate the growth and transformation of peace and health, the continuous release of value

Secondly, after clarifying the certainty of the growth of the business model, in the face of the broad enterprise medical and health management, the safety and health accelerated transformation, forming the second growth curve, mainly reflected in the following three aspects:

First, the company's product identity is strong, the enterprise renewal rate is high, and the employee arrival rate is high.

According to the administrative management department of China Resources Snow Beer (China) Investment Co., Ltd., one of Ping An Health Cooperation Objects, due to the large number of employees, wide geographical distribution of work, and very inconvenient physical examination of employees in remote areas such as Sichuan and Tibet, the annual physical examination of employees is a huge project. Ping An Health not only has strong medical service resources covering the whole country, which can meet the personalized needs of different regions, but also has rich service experience in employee health management of large enterprises, fast response speed, high service quality and good response from employees.

According to the 2023 interim results report, the growth rate of strategic business income in B-end has reached 89% year on year, and the cumulative number of enterprises served has reached 1198. The reputation of high-quality and cost-effective enterprise supervision has also promoted the retention of large customers. The retention rate of enterprises with more than 3000 employees has reached 90%. At the same time, the number of paid households in the past 12 months has reached 3.9 million, an increase of more than 90% over the same period last year.

Second, the company has high barriers to competition, and Ping an Health is transforming into China's leading enterprise health management service provider.

According to the 2023 White Paper on Medical and Health Management of Chinese Enterprises, according to the ability of enterprise medical and health management services, the first echelon includes Ping an Health, JD.com Health and Taikang, among which Ping an Health has the highest score.

Ping an Health has won the highest rating through its first-mover advantage, unique payer resources, national service network and cash channels, as well as a unique business model and one-stop medical and health service capabilities. The advantage of JD.com Health in enterprise health management lies in rich health data and insight, advanced health management platform and comprehensive enterprise health solutions. Taikang's advantages in enterprise health management lie in professional teams, diversified health services, perfect health insurance system and comprehensive enterprise health management solutions.

Source: Billion Euros Think Tank

Third, the company's medical and health service capacity is steadily improving, becoming a good business expansion and good service reputation.

According to the 2023 interim results report, Ping an Health continues to improve its medical and health service capacity and build a more comprehensive medical and health service network. As of June 30, 2023, Ping an Health has established a team of about 50, 000 internal and external doctors covering 22 departments, signed nearly 2400 famous medical experts, and established 23 specialized disease centers. further improve their own medical and health service capacity to meet users' full-scene, multi-level medical and health service needs.

In terms of medical service network, Ping an Health has further integrated online and offline medical service resources, with nearly 4000 cooperative hospitals and 226000 cooperative drugstores, and one-hour drug delivery in 249 cities. In terms of health service network, there are nearly 103000 health service providers for Ping an Health Cooperation, covering a wide range of categories and service forms, such as physical examination, dentistry, anti-aging, pan-health, and so on, to provide users with more complete and quality services.

On the whole, Ping An Health continues to deepen its 2.0 strategy, which has achieved remarkable results in the strategic transformation of F-end and B-end, and has shown strong vitality. By continuously improving its own medical and health service capability and building a more comprehensive medical and health service network, Ping An Health has stepped out of the second growth curve in B-end member health by virtue of its professional advantages, and gradually entered the good situation in the insurance + service mode of F-end Ping An system.

Finally, the perspective will be lengthened, for the judgment of the future development trend of Internet medical enterprises such as Ping an Health, it is crucial to see policy guidance. At the policy level, the state maintains a recognized attitude towards the Internet medical sector, and a series of regulatory rules have been issued to support the healthy development of the industry. In July 2023, the National Development and Reform Commission issued measures to restore and expand consumption, clearly proposing to increase the consumption of health services, develop "Internet +" medical health, and further improve the charging policy for Internet diagnosis and treatment. gradually bring the qualified "Internet +" medical services into the scope of medical insurance payment. Programmatic documents such as the National Health Plan of the 14th five-year Plan and the Digital economy Development Plan of the 14th five-year Plan define the value of Internet health care for medical services and the digital economy, and show the support and recognition of top-level design for Internet health care.

It is believed that with the continuous realization of Ping an Health at the performance level, its great potential for development plus marginal positive policy guidance is expected to continue to catalyze the development of the company in the longer term and richer dimensions. this momentum will eventually be reflected in the capital markets.