Medlive's Long-Term Growth, Margin Expansion Intact, but Short-Term Policies May Affect Demand

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's 3-5 year revenue CAGR to be 30% 2023, respectively, driven by incremental clients in its precision marketing solutions but short-term anti-graft policies may affect demand. 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. We expect net margin expansion to 30% and 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.