【Company Research】PA Good Doctor (1833 HK) – Endeavor to upgrade channels and services
- More policies issued to allow reimbursement for online medical consultation and related drug expenses. In Jan 2021, the National Healthcare Security Administration (NHSA) released regulatory guidelines about NDRL reimbursement for qualified medical institutions (incl. online hospitals) and pharmacies. The NHSA clearly stated that online medical services provided by qualified online hospitals can be reimbursed. Furthermore, the policy also allows pharmacies to provide “O2O” services for patients who receive prescriptions from online hospitals and then purchase related drugs from offline pharmacies. Recall that in Nov 2020, the NHSA also announced detailed guidelines about reimbursement for online medical services. We believe the COVID-19 pandemic will further accelerate the process of regulatory loosening for online medical services.
- Consistent regulatory loosening for online medical services. According to recent regulatory files, online medical services for revisiting patients with chronic or severe diseases will be allowed for reimbursement. At the moment, the authorities only allow online medical services for revisiting patients. We expect the reimbursement coverage will gradually expand to more common diseases and will even allow initial online diagnosis for common diseases. Meanwhile, online and offline medical services will share same reimbursement standards. Online medical consultation fees and related drug costs will all be reimbursed, except for drug shipping costs. Initially, reimbursement will be only available for local patients who receive services from local online hospitals. However, the government stated that cross-region reimbursement (异地就医直接结算) for online medical services will become feasible in the future.
- PA Good Doctor is upgrading its channels and services to strengthen its leading position. We expect the Company to expand its inhouse physician team from 1,409 people as of end-2019 to more than 2,000 people as of end-2020E and over 3,000 people as of end-2021E. Meanwhile, we expect the Company to aggressively expand its external physician team in order to provide more comprehensive services. The Company currently operates the largest number of self-built and co-constructed online hospitals. We expect the Company’s online hospital network to cover China’s major cities in coming years. Leveraging Ping An Group’s rich corporate client pool, the Company is penetrating into more corporate clients, providing membership services to corporate’s staff and customers.
- Maintain BUY. Considering the investments in channel penetration and service upgrade, and potential one-off foreign exchange losses, we lowered our FY21E/22E/23E attributable net loss forecasts to RMB1,020mn/ 1,331mn/ 964mn. We lowered TP from HK$150.0 to HK$142.07 based on a 10-year DCF model (WACC:9.3%, terminal growth rate: 4.0%). Catalysts: Faster-than-expected user growth; Regulatory loosening.
