Stock pick: Morphic Asset Management

When you invest in China, you invest in what the country needs and if anything COVID-19 has shown that the world needs healthcare. Ping An Healthcare and Technology is a leading internet healthcare company. It provides health care software solutions and operates four divisions: semi-automated online medical consultations, health-mall, health and wellness interaction & consumer healthcare.

COVID-19 had just broken out in China, and we chose Ping An Healthcare and Technology, better known as Ping An Good Doctor (PAGD) as the market leading semi-automated (AI assisted) online healthcare and healthcare e-commerce platform. Following the COVID-19 breakout, daily new registered users increased 10-fold. It is the largest online healthcare platform in terms of MAUs (monthly active users) and as the name suggests it has strong branding from the Ping An group and founder pedigree.

We think the company is uniquely positioned and is building a visible mote with a large addressable audience that spans beyond the Chinese borders. Our base case assumes 200 million MAU by 2025 based on a 30% penetration rate and a stable 50% market share. As at December 2019, the daily consultation run rate was 729000, +36% YoY, and expected accelerate in following the COVID-19 outbreak. The strong operating leverage of the business model will see the company reach profitability in FY2021.

Average Daily Consultations (,000)

Volume of Online Consultations in China 2012-2026E

The announcement in April that Hunan province granted pension cover to PAGD online consultations is validation that the service addresses the need for basic healthcare services across China. As more provinces allow pension cover for PAGD, user acquisition will accelerate, solidifying PAGD’s position as the market share leader. However, any negative government regulation and/ or any litigation around incorrect diagnoses might impact MAU growth and the stock’s share price.

This information has been prepared and provided by Morphic Asset Management. To the extent that includes any financial product advice, the advice is of a general nature only and does not take into account any individual’s objectives, financial situation or particular needs. Before making an investment decision an individual should assess whether it meets their own needs and consult a financial advisor. This stock pick was published on 22 May 2020 and is subject to change.