Yidu Tech delivered strong FY1H22 revenue of RMB502mn (+62% YoY), mainly driven by (1) health management platform and solutions ramp-up from low base (+643% YoY) and (2) +106% YoY growth in life sciences solutions segment. Adj. net loss widened from RMB166mn in FY1H21 to RMB322mn in FY1H22 on higher R&D/ S&M expenses. We are positive on Yidu Tech growth outlook given increasing big data solution adoption in healthcare industry in China. We have BUY recommendation and SOTP-based TP of HK$43.77 (19.4x FY23E P/S).
Stable growth in big data platform and solutions. Excluding one-off COVID-19 related medical devices and other prevention supplies in FY1H21, FY1H22 big data segment achieved stable growth of +21.1% YoY to RMB157.9mn. In FY1H22, Yidu Tech added 4 active customers in FY1H21 to 99 in total (78 are hospital customers, 21 are regulators and policy makers).
Adj. GPM declined from 56.4% in FY1H21 to 43.9% in FY1H22, dragged by more project implementation work post COVID-19. We expect adj. GPM to gradually recover at 1-2 pct pts YoY in FY22-24E.
Life sciences solutions ARPU boosted. As Yidu Tech life sciences solutions significantly shortened new drugs/ medical device development time, pharmaceutical, biotech and medical device companies are increasing adoption. Yidu Tech life sciences solutions achieved rapid ARPU growth of +70% YoY while revenue retention rate was high at 135%. We expect life sciences segment to grow at 78% CAGR in FY21-24E, on both surging number of active users (42% CAGR) and ARPU (26% CAGR).
Health management platform and solutions to become new growth driver. Health management platform and solutions ramped up from low base in FY1H22, achieved revenue of RMB190mn (vs. RMB26mn in FY1H21) and adj. GPM of 25.8% in FY1H22 (vs. -0.1% in FY1H21). We expect revenue CAGR of 70% in FY21-24E driven by YiduCore’s synergy.
Benefiting from healthcare industry digitalization trend. Yidu Tech is the largest healthcare big data specialist in China with 5% market share in 2019, according to EY. We expect revenue to grow at 49% CAGR in FY21-24E as China healthcare industry undergoes digitalization. Our SOTP-based TP of HK$43.77 implies 19.4x FY23E P/S, in-line with life-science solution peers average. Downside risks include tightening regulations in data privacy, lower- than-expected adoption and intensifying competition.