Strong health data intelligence infrastructure as a moat
On a fast track for monetisation
Initiating coverage with a Buy (1) rating and TP of HKD60
Investment case: We initiate coverage of Yidu Tech, a major Big Data healthcare solutions provider in China, with a Buy (1) rating and 12-month TP of HKD60.
Early-mover in building data intelligence infrastructure. While some peers mainly develop IT systems for hospitals, Yidu specialises in building Big Data infrastructure that helps hospitals integrate different IT systems and efficiently converts the heterogeneous data into computable, structural and standardised data. In our view, its core data intelligence infrastructure, YiduCore, lays a solid foundation for Yidu to capture growth opportunities, given YiduCore’s capabilities across 3 layers: 1) data processing, 2) medical knowledge and insights, and 3) scenario-specific operations.
Big Data capability provides a moat. Leveraging its strong Big Data processing and analytical capability, Yidu can quickly gain insights and knowledge uncovered from the data, and continuously reinforce its AI algorithm and knowledge graph. This can significantly improve data mining efficiency and enable Yidu to rapidly develop new solutions, in our view.
Notably, it took a year of onsite work for Yidu to launch its first project, but now it can complete a project in 3 months with most tasks done remotely.
Monetisation on a fast track. We see Yidu’s strong offline distribution capability and rigorous data arrangement as its key assets, which enhance customer stickiness against a backdrop of stringent regulatory scrutiny. We expect Yidu continue to see strong revenue growth (+55% CAGR in FY21- 23E) driven by its rising brand recognition (more customers) and increasing types of solutions to unlock monetisation.
Catalysts: Operation-wise, stronger-than-expected monetisation momentum in 1HFY22 could be an upside catalyst. As a secondary catalyst, more supportive government policies should also aid the share price, for example, encouraging medical institutions to digitise or share data among a wider variety of healthcare entities.
Valuation: We argue that Yidu deserves a valuation premium vs. peers for its early-mover advantages in building a data intelligence infrastructure, faster monetisation pace, more prudent data security control as well as credible and skilful team. We assign a 24x target PSR to its 2022E (calendar year basis) revenue. As such, we initiate Yidu with a Buy (1) rating and target price of HKD60.
Risks: Delayed progress in commercialisation, concentrated customer base and policy headwinds in data security.