Is there more room to go for AliHealth and JD Health ? 

From the long term perspective, there’s still has large upside room for the pharmaceutical eCommerce players, for both JD Health and AliHealth, as the market leaders will particularly benefit from the deregulation of online prescription sales. Since the second half of the last year, we see a series of favorable policies/documents which have been launched to encourage adopting online channels to purchase prescription drugs. Online prescription drug market has a large addressable market of over RMB 500bn, and the penetration for online channel is as low as less than 2% last year, and thus we believe they still have large room to go for both JD health and AliHealth over the long run. 

 

Right, but do the valuation make sense? Seeing as the AliHealth now has an extremely high PE. 

Short-term wise, the valuation for pharma eCommerce players is high due to the high market anticipation of online prescription drug sales, but we think the fundamental change/benefit will not be that fast in the near term. It is because that the topline growth still depends upon that internet players need more time to acquire more online doctors, as people who purchase Rx online have to consult with online doctors with e-prescriptions. Also, in terms of the insurance side, most of users cannot use social insurance card to make direct payment. Hence, internet players need more time to negotiate with regional insurance authority cities by cities for the national-scale insurance connection. Bottom line improvement will not be that fast as well, because the margin of Rx is relatively lower vs. OTC and other pharmaceutical products. They mainly intend to acquire massive traffic in the short term, but the fundamental benefit will not be that fast .