JD Health squares off to Alibaba in online healthcare with trading debut success

MarketLine   9 December 2020 (Last Updated December 9th, 2020 14:35)

JD Health share price closed in green at 56% growth in the end of its first day of listing, which ended up with the company raising $3.5bn.

JD Health squares off to Alibaba in online healthcare with trading debut success
Credit: Freer / Shutterstock.

Shares of the healthcare unit soared up to 75% in HK biggest IPO of the year

JD Health share price closed in green at 56% growth in the end of its first day of listing, which ended up with the company raising $3.5bn. Although the final size of the offering could go up to more than $3.9bn should the bankers exercise their overallotment options.

Demand for online healthcare services have boomed over the pandemic, as fear of contagion has kept people away from outpatient facilities and pharmacies. Rise in demand has driven JD Health revenue up 76%, although it also caused the company $820m in net loss.

However, it looks like JD healthcare unit has everything to succeed in the short-term. Apart from the expected strong demand, the strict regulatory framework for healthcare services in China benefits the largest companies that the Communist Party champions in other sectors. This will make it easier for JD Health to secure a significant market share in the long run.

Post Covid era looks good for the Chinese online healthcare services market

Although this sector has proven prolific during the pandemic crisis, these services may be here to stay as they make up for some of the Chinese healthcare system shortcomings. Specially the online consultation and prescription services, which will facilitate access to healthcare for rural population and the elderly.

Demographic indicators predict a significant growth in demand for healthcare services, since the Chinese population is aging rapidly. Accounting for 17% of its total population already, the Chinese government estimates that the number of people aged 60 or more, will almost double by 2050.

Chinese regulators are well aware of the need for additional healthcare solutions, and they are already promoting the use of these services by having insurance companies, and the government itself, paying for the aforementioned online prescriptions and consultations services.

Tech giants extend rivalry to virtually every fast-growing sector

As it was made evident by the last-minute halt of Ant Group IPO, the Chinese authorities may be inclined to limit the grab of power that Alibaba has across industries. That may become a future competitive advantage for JD over Alibaba’s AliHealth, which has double in share price this year.

However, it is a crowded competitive environment, since most of the Chinese tech giants are determined to dominate the health tech market. Companies like Huawei, DiDi, Tencent and Baidu, they all have developed or invested in platforms focused on implementing AI into healthcare research and services.