CITI'S TAKE
No.1 healthcare big-data solutions provider in China; benefiting from a fast- growing HBDS market - We initiate coverage on Yidu Tech shares at Buy / High Risk (1H) with an HK$50 target price. Yidu Tech is the No.1 healthcare big-data solutions provider in China as of 2019 with 5.0% market share, per the EY Report.
Leveraging on YiduCore, Yidu has: 1) covered 500+ hospitals in China, including 70+ Grade 3A hospitals; 2) processed and analyzed upon authorization over 1.7bn healthcare records from over 400mn patients; and 3) monetized multiple healthcare solutions. The China healthcare big-data solutions (HBDS) market was RMB10.5bn in 2019 and is forecast by the EY Report to grow to RMB57.7bn by 2024E at a CAGR of 40.5%, with penetration rate rising from 7.2% in 2019 to 16.2% in 2024E.
Scalable and self-reinforcing YiduCore to empower customers - YiduCore, Yidu's proprietary data intelligence infrastructure with deep insights and knowledge, is highly scalable and flexible. YiduCore features: 1) speedy and accurate data- processing capabilities, 2) self-reinforcement through an expanding ecosystem, and 3) strong capability to develop research-driven healthcare solutions.
Multi-pronged monetization potential from a growing ecosystem - Yidu has enjoyed strong network effects from its ecosystem to further develop and expand its business. Based on expert network and medical knowledge from big-data solutions, Yidu attracted more pharmas/biotech to do R&D, helped insurance companies in policy design, and launched a health management platform to serve individuals.
Valuation - Our HK$50.0 target price is an NPV-based SOTP valuation, using a WACC of 10.9% and a terminal growth of 3.0%.
Risks - Key risks include: 1) limited operating history and lack of profitability; 2) risks of tender bidding; 3) competition; and 4) potential restriction on healthcare data use.