Behind the Jingdong health prospectus fire, it is difficult to escape the "big pharmacy" type of operation

Founded just over a year ago, Jingdong Health's financial report is more "healthy" than that of Ali Health, which was born in October 2014! Because of the special nature of the drugs, born from the Jingdong self-management model of Jingdong Pharmacy, become the pillar of Jingdong Health revenue, but also its later rise over the key of Ali. Beginning with the beaching of the Hong Kong Stock Exchange, Liu Qiangdong in the field of health finally succeeded in opening a second battlefield.

Another heavyweight player in the big health track is about to land on the Hong Kong Stock Exchange.

November 27, according to 36 Krypton reports, Jingdong Health (06618) on November 26, the first day of the prospectus, subscription response enthusiastic, as of 4:57 p.m. on the 27th, Jingdong Health has recorded "margin" 96.752 billion Hong Kong dollars, oversubscribed 70.7 times. It is reported that Jingdong Health IPO to issue 380 million new shares, the price of 62.80 Hong Kong dollars / shares to 70.58 Hong Kong dollars / shares, the amount of funds raised is about 24 billion to 27 billion Hong Kong dollars, the valuation of about 25.3 to 28.5 billion U.S. dollars.

The year 2020 can be called the "Year of Jingdong" exclusively for Jingdong Group. First, the Dada Group sent to the Nasdaq successfully listed, after the second listing of the Jingdong Group in Hong Kong, followed by the Jingdong digital science, Jingdong Health successively into the listing process.

As a new player who entered the big health track just two years ago, Jingdong Health came to the forefront, surpassing the already-listed Ping'an Good Doctor, and Ali Health under the Ali family on the same stage, and from the point of view of profitability, its net profit has exceeded that of Ali Health. But through the prospectus, but also found some doubts, the strong dependence on the related party Jingdong Group, Jingdong Health after listing can really do independent operation? The company's financial data before the listing can truly reflect the company's situation.

How does net profit exceed that of Alibaba?

If you look at the time of the actual operation, in February 2014, medical health began to operate as an independent business project of Jingdong, and Ali Health was established in the same year; in March 2018, Jingdong Health to obtain the license of the Internet hospital, and formally cross into the track of Internet health care. The Ping'an good doctor and Ali Health at that time, is already a mature product that has been operating for several years.

However, even in the name of "Internet health care", but in terms of the proportion of revenue, Jingdong Health and Ali Health still did not get out of the "pharmaceutical business". In other words, this is the two traditional e-commerce model in the field of medicine reproduction. Whether it's the traditional healthcare system or today's Internet healthcare, the initial stage of its development is the retail of medicines as an entry point, and the model of "medicine for medicine" is difficult to eradicate.

In the current situation, retail pharmacy revenue is still the largest share of digital big health, and predicted that this model will continue for a long time. This is also evident in Jingdong Health, whose nearly 500-page prospectus is full of words related to the "big health" industry, but breaks down its business structure, Jingdong Health is still mainly doing pharmaceutical e-commerce.

From the pharmaceutical e-commerce revenue point of view, Ali Health sales of products revenue of 7.66 billion yuan, accounting for 79.8% of the total revenue, if you add the pharmaceutical e-commerce platform of 12.2%, and even up to the total revenue accounted for 97%; and Jingdong Health's pharmaceutical revenue of 9.43 billion, accounting for 87%, which inevitably raises doubts, a single drug retail can ride the "big health" industry.

From the performance data in recent years, Jingdong Health has undoubtedly shown better growth. According to the prospectus information, in accordance with non-IFRS, the company's net profit from 2017 to the first half of 2020 was 209 million yuan, 248 million yuan, 344 million yuan and 371 million yuan. In the first three quarters of 2020, the total revenue of BOE Health was $13.2 billion.

If compared with peers, Ali Health's revenue for fiscal year 2020 (April 1, 2019 - March 31, 2020) was 9.6 billion yuan, with an after-tax profit loss of 15.696 million yuan; and Ping An Good Doctor's revenue for fiscal year 2019 was 5.065 billion yuan, with an after-tax profit loss of 734 million yuan. Jingdong Health is not only better than its peers, but also in a state of sustained profitability.

In addition, as far as the business model is concerned, in fact, the three are relatively similar, summarized as B2B + B2C + O2O model - their main business all contain registration and booking, online medical consultation, drug retailing, consumer healthcare and Internet **** building and so on. Although the three business models are different, but overall can be divided into retail pharmacy business and online medical health services business.

However, from the business distribution point of view, Jingdong is more comprehensive than Ali Health and Ping Anhao doctor, with a supply chain of traditional Chinese medicine tablets, cold chain of drugs and drugs/non-pharmaceutical wholesale and other unique business. Ultimately, the reason why Jingdong is ahead of Ali Health in terms of performance and continues to be profitable has to do with its business layout strategy.

Jingdong Pharmacy is the killer app?

Drugs are different from ordinary goods e-commerce, one is that their demand for drugs is generally an emergency in the body, so the timeliness requirements are high; the second is that the quality of the drug is also quite demanding. These two conditions, the requirements of drug e-commerce not only to ensure the quality of drugs, and has a mature supply chain to ensure the timeliness of logistics. Relying on its leading peer self-supporting business, Jingdong also has a good performance in the field of pharmaceutical e-commerce.

But if it is just pharmaceutical e-commerce, Ali Health pharmaceutical e-commerce proportion is greater, accounting for 96.96%, the pharmaceutical part of the self-management is also as high as 84.76%, but Ali Health pharmaceutical e-commerce business income, but is still in the red. The reason is that, Jingdong Health rely on "medical + medicine" closed loop, through the accurate docking demand for the use of drugs, improve the efficiency of e-commerce, and ultimately realize the synergistic integration of online medical services and retail pharmacy business.

Under Jingdong's self-management model, the company purchases pharmaceutical and health products from suppliers, and then sells them directly to users after its own quality control, belonging to the B2C model, and Jingdong Health's self-management business is mainly carried out through Jingdong Pharmacy, which can be accessed directly through the window of Jingdong Pharmacy in the Jingdong Health APP. The window can be accessed directly.

In addition, not only online retail, Jingdong also directly operates part of the offline pharmacy, in order to sell this part of the inventory directly to users. At the same time, relying on powerful Jingdong logistics, Jingdong Health has more than 11 large specialized warehouses across the country for storing prescription and over-the-counter medicines, and more than 230 warehouses of various types across the country for storing non-pharmaceutical health products, and cooperates with Jingdong Express and other third-party express delivery manufacturers for the delivery of medicines. Through the combination of self-supporting, online platforms and omni-channel layouts, Jingdong is able to achieve positive complementarity and also meet the urgent needs of customers.

In the end, Jingdong Health, by virtue of its unique self-operated e-commerce experience, the number of users and the repurchase rate of the user "volume and price", however, as the main driver of the retail pharmacy business revenue growth in the number of annual active users also appeared to be a downward trend.

The prospectus disclosed that in 2017-2019, the annual active users of Jingdong Health were 43.9 million, 50.5 million, 56.2 million, an increase of 15.03% in 2018 to 11.09% in 2019.

In fact, both Ali Health and Jingdong Health have a **** the same drawback, that is, they can not be completely independent of the parent body. The prospectus shows that the amount of transactions that Jingdong Health is expected to collect from the group will rise from $139 million in 2019 to $1.250 billion in 2022.

Jingdong Health said in the prospectus that Jingdong Group owns more than 30% of the company's voting rights, and if it encounters potential inconsistencies in interests in the future, the company's solution may not be as favorable as it would be if it were to transact with non-controlling shareholders.

This shows the far-reaching influence of Jingdong Group on Jingdong Health.

Internet healthcare is still in its infancy

By definition, Internet healthcare, also known as online healthcare, is the onlineization of healthcare services with the Internet as the carrier and technical means. However, with the current level of technology, the major Internet vendors are only able to do online registration, medical information query, electronic files, online consultation, electronic prescriptions, remote consultation and other information level interaction. The broader Internet health care, covering the entire chain of the medical industry, involving medical, pharmaceutical, health insurance and other links.

That is, if you want to Internet the entire medical process, the current major vendors do is only the offline information interaction transferred to the line - in addition to Ali, Jingdong, Pingan three, there is also a Tencent, in 2014, through the investment of the way to get involved in the medical, Baidu was also set up very early in the medical business unit, after the Vigorously develop medical AI, but also just scratch the itch, the degree is far from enough. And this also leads to the current services of each family, although it seems to be a wide variety, in fact, highly homogenized. The difference between the different vendors is only the difference in efficiency and quality, and the service also stays only in the circulation area such as information interaction and drug e-commerce.

Even the primary stage of drug e-commerce, its penetration rate is far from enough.Bigdata data show that in 2019, domestic pharmaceutical online sales of 125.1 billion yuan, a year-on-year growth rate of 36%, while the size of the domestic pharmaceutical terminal market has reached 1795.5 billion yuan, the online penetration rate is extremely low, only 7%. In other words, only the more junior pharmaceutical e-commerce, its development is still in the primary stage.

In addition, in terms of the level of gross profit margin, the difference between pharmaceutical e-commerce and headline offline retail pharmacies is not large. According to data from the Ministry of Commerce, in 2019, the gross profit rate of the top 100 domestic drug retailers was 27.5%, and the net profit rate was 4%, and Jingdong Health and Ali Health were similar to this, while both were slightly better than offline small and medium-sized pharmacies.

Therefore, as of now, pharmaceutical e-commerce and offline drug retailing is still no obvious gap. That is to say, online medical did not appear similar to e-commerce on the offline channel revolutionary replacement effect.

In addition, the underlying logic, the existence of Internet health care, in fact, is to use the efficiency of the Internet to maximize the effectiveness of the limited medical resources, but in contrast, the development of online medical resources will also squeeze the already scarce medical resources, which will lead to extremely intense competition, which is not a small challenge for the online medical vendors, including Jingdong Health.

At the current stage of development, the online healthcare market is still in the introductory period, and the major platforms are in the stage of burning money to attract customers, and still cultivate user habits. And because of the special nature of medicine, it can not be overly publicized.

For Internet medical enterprises, once across the break-even point, performance growth will be quite robust. The company's health is now at the head of the race track, with a first-mover advantage. After beaching the Hong Kong Stock Exchange, Jingdong's advantage in the field of Internet health care will also be further expanded.