Medlive Earnings: Solid Results Reflect Normalization of Healthcare Sector After Crackdowns in 2023

We raise our fair value estimate for Medlive to HKD 11 per share from HKD 10 after it reported first-half 2024 revenue of CNY 243.4 million, representing a 40% year-on-year growth. We believe that anti-graft concerns that discouraged Medlive’s ability to reach out to new clients have now likely normalized, given that the company increased its corporate customer base by 24 clients year on year to 158 and the number of projects that it was tasked with marketing by 83 products to 336 during the same time. There was also a more active user base as paid clicks increased 40% year on year to 5.98 million, and the average MAU increased to 2.5 million from 2.2 million. The increase in activity on the platform should reflect the easing of policy headwinds as the crackdown in the healthcare sector since late 2023 has disincentivized many physicians to prescribe and sign contracts for new drugs as they do not want to appear to be receiving kickbacks. Medlive saw an operating margin expansion of 420 basis points year on year as revenue scaled up, driven by its corporate solutions business specializing in targeted drug advertising, which accounts for 93% of revenue.