Medlive Is Niche Industry Market Leader, but Intense Competition and Low Switching Costs Are Risks

We view no-moat Medlive as a leader in the digital healthcare marketing industry with about 21% market share, according to its prospectus. We expect Medlive revenue to increase 19% and 24% in 2022 and 2023, respectively, driven by incremental clients in its precision marketing solutions. Medlive revenue correlates with the growth of China’s healthcare industry, which is expected at 10% per year between 2021 and 2026 according to iResearch, as industry expansion should lead to larger advertising budgets. The digital marketing business is expected to be the lion share of revenue long-term and leads to an attractive net margin profile of 20% for the company. The company expects net margin expansion to 30%, similar to pre-pandemic levels, and we believe that Medlive can reach its target by leveraging the know-how from its joint venture with M3, which has already provided the operational blueprint from its success and dominance in Japan. The company has the largest physician user base among its peers, but it remains to be seen whether this will lead to revenue acceleration. Medlive’s success will be predicated by whether it can continue to grow its client base and if its advertising products are effective enough to justify greater budgeting from its clients.