Chinese healthcare players JD Health, Ping An and WuXi Biologics have struggled so far this year as the Chinese economy slows. Despite share price challenges, the companies have scaled up operations to capture emerging opportunities within the space.
Leading Chinese healthcare players JD Health [6618.HK], Ping AN [2318.HK] and WuXi Biologics [2269.HK] have all seen their share prices struggle this year amid a stunted Chinese economy as continued lockdowns slow down the country’s operations. Compounding this is the pain delivered to Chinese healthcare stocks at the beginning of the year when the US added these companies to a list that limits access to American technology.
Since the beginning of the year, JD Health has slumped 26.3% (through 28 September), while WuXi Biologics has had the poorest performance after declining 47.8%. Of the three companies, Ping An is in a modest lead with a decline of 26.2% in 2022.
Meanwhile, the Global X MSCI China Health Care ETF [CHIH], which has a holding in WuXi Biologicals making up 7.61% of the fund, has seen its value slashed by 39% in 2020 — a much larger decline than that of the Shanghai Stock Exchange Composite [000001.SS], which has fallen 16.3% this year.
JD Health increases healthcare services
JD Health shares spun away from ecommerce giant JD.com at the end of 2020 in an IPO, which raised $3.5bn for the company. In the time since, however, the share price for the healthcare company has declined 35.5% as the Chinese economy shows signs of slowing.
Despite a poor performance in recent months, JD Health was able to produce a strong set of results for the first half of the year. Net revenue grew by 48.3% year-on-year to RMB20.2bn ($2.8bn) with its annual active user accounts growing to 131.3 million, an increase of 22.7 million accounts from the year before.
The company offers both an online retail pharmacy and online healthcare services. In June, JD Health launched three new online consultation services, each tailored to the varying needs of its diverse customer base: Expert Consulting, Instant Consultation with JD Doctors and Nighttime Consultation. Its average daily online healthcare consultation volume has already exceeded by 250,000.
Ping An pushing for a comprehensive healthcare ecosystem
Ping An, China’s largest insurer, runs a large healthcare operation alongside its core finance business. In the last year, Ping An has worked at combining its differentiated healthcare services with its financial businesses, with the aim of providing customers with a one-stop healthcare ecosystem addressing both health and finance concerns. The company revealed that 63% of newly enrolled health insurance customers were using the health management services offered by Ping An.
Despite the steps taken to expand its healthcare operations, the company has faced challenges in other areas of its business. Lockdowns and weaker consumer confidence in China have impacted overall sales, with total revenue falling slightly by 3% year-on-year.
The company’s asset management and property sectors dragged down the performance of the group with year-on-year declines of 40.6% and 22.3% respectively. The life and health insurance business, however, offset some of this with operating profit from the sector growing 17.4% year-on-year.
WuXi Biologics shares hurt after the US imposes regulations
WuXi Biologics shares have sat at the back of the pack this year and have been unable to turn around most losses made at the beginning of the year. In the first quarter of the year, news that the US Commerce Department was adding the company to its ‘unverified’ list hurt the company’s share price. Being on the list limits the company’s access to US technology and imports.
Shares fell quickly after the department announced the news, bringing the company to suspend trading of its Hong Kong-listed shares to ease the sell-off. The share price has fallen to as low as 40.3HKD since the announcement despite trading as high as 127.3HKD the summer prior.
In spite of the challenges that may come from the drop in US imports, the company insists it is well positioned to grow its biological manufacturing operations. The group grew the number of its projects to 534 in June, an increase of 30.9% from 408 projects the year before. This was matched by revenue growth of 63.5% year on year to RMB7.2bn.