Mediwelcome: Reasonable valuation with HK listing on track for January 19

With the improvement in China's economic level, the ageing population and the unhealthy living habits of adolescents, the incidence of cardiovascular and cerebrovascular disease is increasing. There were 391 million patients with cardiovascular and cerebrovascular diseases in China in 2019, or 26.8% of the population. The incidence of cardiovascular and cerebrovascular disease in China will increase to about 429 million in 2024.

In this huge market space, Mediwelcome, a Beijing-based provider of comprehensive medical marketing solutions for cardiovascular and cerebrovascular diseases, faces excellent development opportunities. Its Hong Kong shares (02159.HK) will list on January 19, so further exploration of the company's quality and reputation follows.

1. Business support from three segments, leading the industry in medical track segmentation

Founded in 2000, Mediwelcome is China's largest provider with comprehensive medical marketing solutions for cardiovascular and cerebrovascular diseases. At present, its business layout mainly involves three areas: comprehensive medical marketing solutions, Internet hospitals and CRO services. The new businesses of the latter two are still in the early growth stage, while the comprehensive medical marketing solution is the advantageous business segment formed by the long-term operation, including medical conference service, patient management service, marketing strategy and consulting service.

In the long-term deep industrial cultivation process, Mediwelcome has formed a head leading advantage. According to the prospectus, its medical conference services generated revenue with 282 million yuan in 2019, accounting for 4.9% of the market share, which ranking the first place. However, the top five participants in the industry only accounted for 6.7% of the market share, which implies the dispersion of the track market structure where Mediwelcome is located.

From the perspective of its long-term opportunities on the track, on the one hand, it is due to the improvement of industrial concentration. As a head enterprise, Mediwelcome has a high probability of achieving continuous start by virtue of its leading edge. On the other hand, from the business's core value viewpoint, the high-quality doctor resources that Mediwelcome has accumulated, the huge patient groups that it has contacted behind it, as well as all kinds of world-renowned drugs and national medical organizations, it will also have the opportunity to further transfer to other business sectors, which is the strength of Internet hospitals and CRO services together with other advantages.

According to the prospectus, Mediwelcome has maintained long-term and stable business relations with world-renowned pharmaceutical companies and national medical organizations. Five of the world's top 10 pharmaceutical companies are its customers based on the revenue in 2019. In addition, as of June 30th, 2020, Mediwelcome had developed a network of about 24,000 cardiovascular and cerebrovascular disease doctors, more than 70% of whom work in Chinese tertiary hospitals. At the same time, it also has a medical advisory committee composed of domestic and foreign top cardio-cerebrovascular disease experts as well as a medical team with 32 professionals.

With its advantageous resources, Mediwelcome prospects are predictably good.

2. The industry has a broad development prospect, and the business collaborates in building core competition barriers

From the perspective of the business layout in Mediwelcome, its three business segments have built an aggregation platform based on the long-term accumulated advantageous resources. Also it formed a nice synergistic effect internally, finally, a complete service closed loop around the ecological chain of cardiovascular and cerebrovascular diseases is constructed. In this mode, it can not only deeply explore the industrial value chain to seek value-added service opportunities, but also build core competition barriers. On the basis of continuous empowerment and upgrading of the platform ecology, a strong siphon effect is formed, meanwhile more advantageous resources and customer groups are linked together to form a leading trend in the industry.

Disassemble each business segment, it can be found that the fields of Mediwelcome's layout are located on the golden track, facing perfect market opportunities.

Firstly, the integrated medical marketing solutions industry.

This area is focused on improving the efficiency of the healthcare industry, optimizing the healthcare industry, and enhancing access to healthcare services by narrowing the gap between the healthcare industry's key stakeholders (i.e., physicians, patients, pharmaceutical companies, medical organizations, and hospitals).

Mediwelcome is specifically in the field of comprehensive medical marketing solutions for cardiovascular and cerebrovascular diseases. Due to the increasing prevalence of cardiovascular and cerebrovascular diseases, the growth momentum of this field shows a satisfactory trend. In terms of revenue, the CAGR of Chinese comprehensive marketing solutions for cardiovascular and cerebrovascular diseases reached 11.1% from 2015 to 2019. It is estimated that the annual revenue in 2024 will increase from 5.6 billion yuan in 2019 to 8.7 billion yuan, while the compound annual growth rate in 2019-2024 will reach 9.2%.

Considering that Mediwelcome is in the leading position in this segment, with a strong doctor resource network, long-term customer relationship and professional knowledge team. In recent years, the state has been committed to reducing the burden of cardiovascular and cerebrovascular diseases, raising disease awareness, improving diagnosis and treatment rates, also in particular promoting the preference of high-quality medical resources to grass-roots level. All of them are helpful to promote the further expansion of the whole market. Mediwelcome is faced with huge market opportunities and policy dividends.

In addition, the Internet hospital, its main business involves online consultation and diagnosis, electronic prescription and patient follow-up. Nowadays, Internet hospitals have boomed, giving birth to a number of industrial unicorns. According to relevant data, there were about 342 internet-based hospitals in operation in China in 2019, and the number is expected to grow to more than 500 by 2020. In terms of the Chinese market for Internet hospital services under cardiovascular and cerebrovascular diseases, the revenue is expected to increase from 16.8 billion yuan in 2019 to 80.4 billion yuan in 2024, with a compound annual growth rate of 36.7%.

From the perspective of Mediwelcome advantages in entering into the track of Internet hospitals, on the one hand, it focuses on the management of chronic diseases such as cardiovascular and cerebrovascular diseases, which naturally has the advantages of online docking. At the same time, the huge resources of doctors and patients accumulated offline can be more easily accessed to the Internet medical platform. Long-term accumulated nice public praise and professional advantages are also more likely to get the close support from the affected groups. Compared with some large and complete Internet medical giants, its more detailed and professional services will have more market affinity.

Then finally, CRO services, which are outsourcing research services to pharmaceutical or biotech companies. As the upstream of pharmaceutical R&D, the market size of this industry has a strong positive correlation with the R&D investment. In recent years, Chinese pharmaceutical R&D investment continues to show high growth, which brings huge development space for CRO service market. From the perspective of market size, the market size of CRO service has increased from 2.8 billion yuan in 2015 to 6 billion yuan in 2019, and is expected to further increase to 14.2 billion yuan in 2024. At present, the competition pattern of CRO services in China is relatively dispersed. In terms of revenue in recent years, the top five CRO service providers account for about 20% to 25% of the total market share.

Mediwelcome's entry into CRO service is mainly based on its long-term and stable relationship with pharmaceutical companies. Meanwhile, the huge patient group brought by the doctor network, as well as the accumulation of professional knowledge in the industry. By virtue of these advantages, it is also expected to further open the room for growth by capturing business opportunities in drug development.

3. Accelerate the landing of strategy and enjoy certain growth opportunities

From past performance, the overall growth momentum of Mediwelcome is strong. In 2017-2019 and the first half of 2020, the revenue was 259 million yuan, 299 million yuan, 427 million yuan and 139 million yuan respectively, and the net profit was 30.216 million yuan, 39.677 million yuan, 22.02 million yuan and -4.007 million yuan respectively. Under the impact of the epidemic in the first half of this year, its profits are under pressure in the short term. However, in terms of the long-term trend, its existing advantageous businesses will probably maintain the momentum of steady growth. At the same time, with the continuous landing of the Internet hospital and CRO service business layout, its performance is expected to move to a higher level.

It is worth mentioning that the development trend of CRO service and Internet hospital service business has begun to emerge. In the first half of this year, it has started to contribute to the revenue one after another, and the future growth will gradually being released.

At present, Mediwelcome is actively making continuous efforts towards the three business segments. It has built a number of technical platforms to improve comprehensive medical marketing solutions. As a user of the conference management system focusing on on-site medical seminar organization platform, medical association +App, for example, is able to make medical organizations and pharmaceutical companies submit on-site meeting requests as well as supervise meetings, which greatly facilitates users. So far, over 22,000 seminars have been held on the platform. The Giraffe platform serves users of the online medical seminar platform, covering all 36 provincial hospitals in all 31 provinces and autonomous regions in China. In addition, the online meeting assistant and online education official account could serve the doctors and patients at the same time. The mobile platform has also been able to provide online consultation and electronic prescription services under the Internet hospital branch.

With the creation of a series of technology platforms, Mediwelcome has gathered huge data resources. In terms of the current policy environment, the government highly supports the healthy development of medical big data, smart medicine, telemedicine and other industries. While it also brings great imagination space for the layout of Mediwelcome in this field.

As early as 2019, Mediwelcome launched online medical consultation and issue electronic prescriptions. In 2020, its Internet medical platform, in partnership with Shiyao Group, launched the "Standardized out-of-hospital management Project for Stroke Patients". This project is committed to providing one-stop out-of-hospital management plan for post-discharge consultation, follow-up, examination and medicine delivery to stroke patients in China, so as to meet the needs from continuous professional diagnosis and treatment from stroke patients with "medication + follow-up + examination". The partnership is also notable for the fact that Mr. Chen Chuan, the spouse of Mr. Zhang Yitao, a non-executive director and controlling shareholder of Mediwelcome, is an independent non-executive director in Shiyao Group. At the same time, he is also a director of many listed pharmaceutical companies in China. He has a wide social network in the industry. It is not difficult to imagine that with the successful implementation of the cooperation project with Shiyao Group, Mediwelcome will take advantage of its shareholders' vast resource ecology to further expand cooperation opportunities with leading pharmaceutical enterprises such as Shiyao Group, thus bringing opportunities for the growth of the business sector.

Finally, from the perspective of CRO service, an important point of Mediwelcome in the future, this business is a natural extension of patient management services. It provides CRO services to pharmaceutical companies and medical organizations mainly by assisting customers to collect and record patient data from customer clinical trials, monitoring the precision and accuracy of recorded data, reviewing and collating data records, as well as making follow-up visits to patients. This business segment has always been the place where big stocks emerge, and the market expects the industry scale to be over 100 billion. Considering the low concentration of the whole domestic CRO industry, the industry maintains a high growth trend. This will also mean that by virtue of its own strong resource endowment, Mediwelcome will still have a lot to do, so that enjoying the certainty of growth opportunities.

4. Conclusion

In general, the cardio-cerebrovascular disease subdivision track based on Mediwelcome has a leading scarcity. At the same time, the Internet medical and CRO service sectors, which are under development, have high growth expectations, and the market of these two areas often gives relatively high valuations. Earlier, the market value of JD Health (06618.HK) briefly exceeded HK $600 billion, reflecting the market capital's pursuit of Internet medical treatment. In addition, from the perspective of CRO services, according to Futuo, the overall price-earnings ratio of Hong Kong pharmaceutical outsourcing concept sector is 279 times. Among them, Wuxi APP Tec (02359.HK) will increase by 120% in 2020, with its total market value reaching 380 billion yuan, and the market value of Hong Kong shares reaching 48 billion yuan. Pharmaron (03759.HK) will increase by 200% in 2020, with its total market value exceeding 100 billion yuan, indicating that the market is optimistic about CRO sector.

Focusing on the listing of Mediwelcome (02159.HK), its market value is only 800 million yuan at the ceiling of the listing price, which means it faces the situation of undervaluation. We believe in the current hot Hong Kong new stock market environment, it also leaves an excellent window for investors, so the listed performance is worth the wait.

Visit Mediwelcome Healthcare Management & Technology Inc. at https://www.mediwelcome.com.

Media contact:

Heidi He, Peanutmedia

E: [email protected], www.peanutmedia.com

Source: Mediwelcome Healthcare Management & Technology Inc

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