Telemedicine/Ping An: the good doctor

Getting to a doctor’s appointment safely has been nerve-racking lately. In China, round-the-clock medical consultations on mobile phones have made that easier — and helped mitigate a protective gear shortage. Ping An Good Doctor, the country’s largest online healthcare platform, is transforming expectations for patients and investors.

The business enjoyed ten-fold growth in new sign-ups as the pandemic started spreading. Sales grew at an average annual rate of 100 per cent over the past three years. The Hong Kong-listed shares have quadrupled in a year. They remain strong on the belief the business has proved its utility, even as coronavirus-hit stocks recover.

Yet one thing platform operator Ping An Healthcare and Technology has not been so good at — at least until now — is making a profit. Marketing costs to build the user base have been high. A state-run medical system has made forking out additional fees for a 15-minute mobile consultation seem unattractive.

That explains why nearly two-thirds of revenues came from lower-margin routine physical check-ups when it first launched.

Since then, online consultations have grown to nearly a fifth of the total. High-margin online drug purchases have become the biggest contributor at almost 60 per cent.

That points to an encouraging profit trend. Losses peaked in 2018. The company reported a smaller-than-expected net loss of Rmb733m ($105m) last year as sales grew more than a half. Profit margins rose 4 percentage points to 44 per cent.

Though shares in Ping An Healthcare have soared, they trade at an enterprise value-to-sales ratio of 21 times. That is a discount of a fifth to smaller local peer Alibaba Health and US rival Teladoc.

The business has upside from its status as a spin-off from China’s biggest insurer Ping An — which still holds a 41 per cent stake. The parent is helping boost margins through tie-ins.

The longer the pandemic lasts, the more likely behavioural changes in healthcare will stick — remote consultations included. Years of scaling up should start paying off earlier than expected.

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