JD Health Provides Update on Improved Outlook and Mitigated Policy Risk; FVE Increased to HKD 64

We are raising our fair value estimate for JD Health to HKD 64 from HKD 59 after the company stated that it will likely reach the top end of its 2022 full-year guidance range of 38%-43% year-on-year revenue growth due to better-than-expected reopening measures. We are also increasing our outlook for 2023 and 2024 due to expectations that pending regulations regarding online drug sales may now have a minimal impact on JD Health’s growth, which lifts our fair value estimate, but leaves our long-term operating margin forecasts unchanged at 10%. Although we are increasing our valuation, we believe the shares are fairly priced as the improved outlook is likely reflected already, and considerable macroeconomic and policy risks remain. However, attractive buying opportunities could arise should prices pull back from current levels.