Should You Add Medlive Technology Co., Ltd. (2192.HK) In Your Portfolio?
Medlive Technology Co., Ltd. (2192.HK) started its IPO on 30 June 2021 with indicative offer price range between HKD 24.1 to HKD 27.2. Medlive Technology will start its trading in Hong Kong Stock Exchange on 15 July 2021. Should investors add it to their portfolio?
What is Medlive Technology Co., Ltd.?
According to Medlive Technology Co., Ltd. ‘s prospectus, the company is the the largest online professional physician platform in China in terms of registered physician users as of December 31, 2020. The self-developed Medlive platform is widely recognized by physicians in China which had approximately 3.5 million registered users, around 2.4 million of whom were licensed physicians, representing approximately 58% of all licensed physicians in China. Through the platform, the company realize monetization by offering different solutions to address various needs from platform participants. The solutions are divided into three categories, namely, precision marketing and corporate solutions, medical knowledge solutions and intelligent patient management solutions. Most of the revenue is from precision marketing solutions, which offer digital healthcare marketing services to pharmaceutical and medical device companies.
Revenue increased from RMB 83.5 million in 2018 to RMB 121.6 million in 2019 and further increased to RMB 213.5 million in 2020, at a compound annual growth rate (CAGR) of 59.9% from 2018 to 2020.
Gross profit increased from RMB 49.9 million in 2018 to RMB 77.1 million in 2019 and further increased to RMB 156.2 million in 2020. Gross profit margin increased from 59.8% in 2018 to 63.8% in 2019 and further increased to 73.2% in 2020.
Net profit increased from RMB 14.2 million in 2018 to RMB 31.3 million in 2019 and further increased to RMB 85.2 million in 2020, at a CAGR of 145.0% from 2018 to 2020. Net profit margin increased from 17% in 2018 to 25.7% in 2019 and further increased to 39.9% in 2020.
According to the cornerstone investment agreements, the total number of offer shares to be subscribed by the cornerstone Investors would be 70,862,000 Offer Shares. Cornerstone investors including Fidelity Management & Research (Hong Kong) Limited, FIL Investment Management (Hong Kong) Limited, Tencent Mobility Limited, GIC Private Limited, Matthews Funds, Springhill Master Fund Limited and OrbiMed Partners Master Fund Limited.
According to the prospectus, there will be 713,440,000 shares outstanding if the over-allotment option is fully exercised. Based on the data in 2020 which net profit RMB 85.2 million, the earning per share in 2020 should be RMB 0.1194. Assuming an Offer Price of HK$ 27.20, there should be 189 PE for 2020 (RMB/HKD exchange rate at 1.2029).
As discuss in the post ” Why Alibaba Health (0241.HK) down after the announcement of 2021 fiscal year result?“, adjusted PE ratio for similar company Alibaba Health (0241.HK) was 379 and JD Health International Inc. (6618.HK) was 391. It seems the valuation for Medlive Technology is reasonable.
Given the uniqueness of Medlive Technology’s business model, its knowledge database are difficult to imitate which provide a strong barrier for competitor to entry. Medlive Technology also have a proved record for revenue growth and earning ability. As medical spending in China will continuous to growth with aging, Medlive Technology should be a good investment for such aspect.