Initiating JD Health With HKD 59 FVE; Logistics Advantage Is Differentiator in Healthcare E-Commerce

We are initiating coverage on JD Health with a fair value estimate of HKD 59 on the back of its best-in-class logistics capabilities and leading market share in healthcare e-commerce in China. We view JD Health as an attractive differentiated company with a leading market share in a defensive niche e-commerce space that is currently undersaturated. The company could see 35% year-on-year revenue growth in 2022 as it ramps up its user base through traffic acquisition from its parent, JD.com. We believe that healthcare e-commerce in China is one of the few areas that could see above-average growth relative to China GDP in the medium term as medical expenditures become a greater percentage of consumer spending.