3 China Telehealth Stocks to Buy for Growth Investors
June 9, 2021
The Covid-19 global pandemic has changed many industries forever. From e-commerce and streaming to cloud computing and remote work habits, our everyday habits will be permanently different when we emerge from the other side.
One such area that has experienced “hypergrowth” during the Covid-19 pandemic has been telehealth. When we think of telehealth, we picture seeing a “doctor on Zoom” but it’s so much more than that.
That’s why it’s commonly viewed as one of the most exciting growth trends, globally, over the next decade.
While companies like Teladoc Health Inc (NYSE: TDOC) is top-of-mind for investors, it’s actually in China where a lot of innovation in telehealth is taking place.
That’s unsurprising given how comfortable citizens in China are about living their lives online. With that, here are three fast-growing telehealth stocks in China that all long-term investors should have on their radar.
1. Ping An Good Doctor
A comprehensive telehealth provider in China is Ping An Healthcare and Technology Co Ltd (SEHK: 1833), also known as “Ping An Good Doctor”.
A subsidiary of Chinese financial conglomerate Ping An Insurance Group Co of China Ltd (SEHK: 2318), Ping An Good Doctor has been at the forefront of leveraging technology in delivering healthcare in China.
As of the end of 2020, the number of registered users on Ping An Good Doctor’s healthcare platform was an astonishing 373 million (which was up by nearly 60 million during the year) while average daily consultations in 2020 hit 903,000 – up 23.9% year-on-year.
Meanwhile, overall revenue grew at 36% year-on-year in 2020 to hit RMB 6.86 billion (US$1.07 billion). Ping An Good Doctor’s aim is to build a comprehensive offering based on offering users a unique experience.
It employs freelance doctors, as do other telehealth firms in China, but has also built the country’s biggest in-house medical team (among peers) with over 2,200 employees.
Crucially, the company also employs an AI-focused diagnosis system that has collected data and knowledge on over 3,000 diseases and this has recorded an impressive accuracy rate of 99.6% via its online consultation system.
A lot of Ping An Good Doctor’s value proposition rests on being able to effectively deliver comprehensive healthcare services online while also leveraging its parent group’s ability to tie up both insurance and healthcare needs for individuals.
2. Alibaba Health
Second, there’s Alibaba Health Information Technology Ltd (SEHK: 241), which is a subsidiary of e-commerce and cloud giant Alibaba Group Holding Ltd (NYSE: BABA) (SEHK: 9988).
In its latest full-year earnings for the 12 months ending 31 March 2021, Alibaba Health saw sales hit RMB 15.5 billion, up 61.7% year-on-year.
Alibaba Health’s business model is focused more on selling and delivering pharmaceutical medicines for its users.
As a result, its pharmaceutical direct sales business made up over 85% of its overall revenue in the latest full year.
Leveraging its parent’s e-commerce and payments channels, Alibaba Health is able to effectively market itself to hundreds of millions of consumers.
For example, in the latest 12-month period, Alibaba health saw a massive spike in users primarily via annual active users on Tmall’s pharma platform that exceeded 280 million while AliPay’s healthcare channel reached over 520 million annual active users.
Catching up with Ping An Good Doctor, Alibaba Health has been building out its online healthcare offerings via its “Dr Deer App + AliPay healthcare channel” platform.
3. JD Health
Finally, we have another subsidiary of an e-commerce giant, JD Health International Inc (SEHK: 6618). A recent IPO spin-off from parent JD.com Inc (NASDAQ: JD) (SEHK: 9618), JD Health’s business is more similar to Alibaba Health’s than Ping An Good Doctor’s.
It’s also the biggest of the three in terms of overall revenue, with 2020 sales hitting RMB 19.4 billion, up 78.8% year-on-year.
By leveraging JD.com’s own supply chain (as China’s largest first-party e-commerce firm), it has been able to build out its own impressive collection of drug warehouses and fulfillment centres nationwide.
Furthermore, its JD Fast Drug Delivery Service now covers more than 300 cities in China, offering next-day, same-day, and 30-minute delivery slots.
Similar to Alibaba Health, its pharmaceutical and healthcare products sales make up over 85% of its overall revenue.
It also aims to nurture its own online healthcare services to compete with the likes of Ping An Good Doctor. On that front, it’s making progress with its online offering – JD Internet Hospital – receiving 100,000 daily average consultations in 2020.
Remember the long term
It’s important that investors remember that Ping An Good Doctor, Alibaba Health and JD Health are all loss-making businesses as they look to grow in an exciting yet nascent market.
According to Frost & Sullivan, the digital healthcare industry in China is set to hit RMB 4.2 trillion by 2030, up from RMB 218 billion in 2019.
Representing a compound annual growth rate (CAGR) of 30.9%, there is going to be plenty of growth for all these companies in China’s healthcare market over the coming decade.
Disclaimer: ProsperUs Head of Content Tim Phillips owns shares of Ping An Healthcare and Technology Co Ltd, JD Health International Inc, and Ping An Insurance Group Co of China Ltd.
Tim, based in Singapore but from Hong Kong, caught the investing bug as a teenager and is a passionate advocate of responsible long-term investing as a great way to build wealth.
He has worked in various content roles at Schroders and the Motley Fool, with a focus on Asian stocks, but believes in buying great businesses – wherever they may be. He is also a certified SGX Academy Trainer.
In his spare time, Tim enjoys running after his two young sons, playing football and practicing yoga.