7 Jul 2021

CMB International Securities | Equity Research | Company Initiation

Yidu Tech (2158 HK) BUY (Initiation) largest healthcare big data specialist Target Price HK$43.41 Up/Downside +16.2% Current Price HK$37.35 INITIATE AT BUY. Yidu Tech is the largest healthcare big data specialist in China with 5% market share. It analyzed 1.7bn healthcare records from 400mn patients and developed a suite of big data analytics solutions for the healthcare industry. China Software & IT Services

We expect Yidu Tech revenue to grow at 47% CAGR in FY21-24E, reaching RMB2.8bn as China increasing big data solution adoption in healthcare industry Marley Ngan (market growing at 40% CAGR). (852) 3916 3719 [email protected]

 Largest healthcare big data solution provider in China. Yidu Tech, Stock Data founded in 2014 and listed on HKEx in Jan 2021, ranked no.1 in terms of Mkt Cap (HK$ mn) 34,557 revenue in China with 5% market share in 2019, according to EY. Yidu Tech Avg 3 mths t/o (HK$ mn) 63.85 built proprietary data intelligence infrastructure, YiduCore, through analyzing 52w High/Low (HK$) 69.80/ 32.30 Total Issued Shares (mn) 925 1.7bn healthcare records from over 400mn patients upon authorization. Based Source: Bloomberg on this “medical brain”, Yidu Tech developed a suite of big data analytics- driven solutions for the healthcare industry. Shareholding Structure Ms. Gong Yingying 44.99%  China healthcare big data solutions market growing at 40% CAGR. China Sunshine Insurance 10.38% is still in an early stage to adopt big data solutions in healthcare industry (7.2% GIC 6.49% penetration in 2019). China healthcare big data solutions market is expected Source: HKEx

to grow from RMB10.5bn in 2019 to RMB57.7bn in 2024 (40.5% CAGR) and Share Performance life science solutions should deliver the stronger growth at 52.8% CAGR. The Absolute Relative entry barrier is high with hurdles including hospital coverage, follow-up data 1-mth -4.0% -1.3% accumulation and advanced technology capabilities. 3-mth 2.0% 4.9% 6-mth NA NA  Yidu Tech to deliver 46% revenue CAGR in FY21-24E. Yidu Tech has 3 Source: Bloomberg

business segments namely 1) big data platform for hospitals and regulators 12-mth Price Performance (46% of FY21 revenue), 2) life science solutions for pharmaceutical, biotech (HK$) and medical device companies (21%) and 3) health management platform 70.0 2158 HK HSI (rebased) 60.0 (for patients and insurance companies (29%). We expect Yidu Tech revenue 50.0 to grow from RMB867mn in FY21 to RMB2,772mn in FY24E (47% CAGR), 40.0 30.0 mainly driven by increasing no. of active customers, especially in life science 20.0 sector (80% FY21-24E revenue CAGR) where big data solutions create 10.0 0.0 highest value that shorten drug/ medical device development cycle. Jan-21 Apr-21

Source: Bloomberg  Initiate at BUY. We initiate at BUY with target price of HK$43.41. Our SOTP

valuation implied 20x FY23E P/S, in-line with life-science solution peers Auditor: PwC average. Downside risks include tightening regulations in data privacy, lower than expected adoption and intensifying competition.

Earnings Summary (YE 31 Mar) FY20A FY21A FY22E FY23E FY24E Revenue (RMB mn) 558 867 1,303 1,938 2,772 YoY growth (%) 447% 55% 50% 49% 43% Operating profit (RMB mn) (590) (443) (598) (798) (1,016) YoY growth (%) n.a. n.a. n.a. n.a. n.a. Net income (RMB) (1,510) (3,700) (589) (790) (1,010) Please cast your valuable vote EPS (RMB) (2.15) (4.00) (0.64) (0.85) (1.09) for CMBIS research team in the YoY growth (%) 58% 86% -84% 34% 28% 2021 Asiamoney Brokers Poll: P/S 59.6 38.4 25.6 17.2 12.0 ROE (%) n.a. n.a. n.a. n.a. n.a. https://euromoney.com/brokers Net gearing (%) -101% net cash net cash net cash net cash Source: Company data, Bloomberg, CMBIS estimates

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Contents

Investment Thesis ...... 3 China healthcare big data solutions demand to grow at 40% CAGR...... 3 Proprietary data-intelligent infrastructure – YiduCore ...... 3 Stable growth in big data platform and solutions ...... 3 Life sciences solutions create high value-add to customers ...... 3 New revenue stream from health management platform ...... 3 Initiate at BUY ...... 3 Focus Charts ...... 4 Company Overview ...... 5 Industry landscape ...... 6 China’s healthcare industry accelerating digitalization investment ...... 6 China healthcare big data solutions demand to grow at 40% CAGR...... 7 Competitive landscape ...... 8 Core data-intelligence infrastructure – YiduCore ...... 10 Proprietary data-intelligence infrastructure ...... 10 Data arrangements and security ...... 10 Big data platform and solutions ...... 11 Stable growth in big data platform and solutions ...... 11 Solutions for hospitals ...... 12 Solutions for regulators ...... 13 Part of big data solution pricing is recurring ...... 14 Life sciences solutions...... 15 Strong value add to customers, reflected in higher retention rate ...... 15 Analytics-driven clinical development ...... 16 Real-world Evidence (RWE)-based research ...... 17 Evidence-based digital commercialization ...... 18 Health management platform and solutions ...... 19 Emerging revenue stream ...... 19 Insurance technology and disease management solutions ...... 20 Financial analysis ...... 22 Revenue to grow at 47% CAGR in FY21-24E ...... 22 Gross margin to decrease on mix change ...... 23 Opex ratio declining ...... 24 Working capital improving but free cash flow to remain negative...... 25 Valuation ...... 27 Initiate at BUY with target price of HK$43.41 ...... 27 Company profile ...... 29 Management background ...... 29 Shareholding structure ...... 30 Investment risks ...... 30 Financial Summary ...... 31

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Investment Thesis China healthcare big data solutions demand to grow at 40% CAGR China healthcare big data solutions market size is expected to grow from RMB10.5bn in 2019 to RMB57.7bn in 2024 (40.5% CAGR) with penetration rate rise from 7.2% to 16.2%, according to EY estimates. We identified 3 types of providers that Yidu Tech is competing against: traditional IT companies, traditional CROs and healthcare big data solution specialists. We think LinkDoc is the closest peers and Yidu Tech prevails in hospital coverage (500 for Yidu Tech vs. 330 for LinkDoc) and the number of healthcare records collected (400mn for Yidu Tech vs. 2.5mn for LinkDoc). Also, LinkDoc is relatively niche and specializes in oncology while Yidu Tech disease registries cover over 50 disease areas.

Proprietary data-intelligent infrastructure – YiduCore YiduCore is the proprietary data intelligence infrastructure built by Yidu Cloud. It is built through processing and analyzing 1.7bn healthcare records from 400mn patients upon authorization. Based on this “medical brain” YiduCloud developed a suite of data-analytics healthcare solutions for the healthcare industry.

Stable growth in big data platform and solutions YiduCloud launched big data platform and solutions in 2015. The platform aggregates raw data and process them into structured and standardized data. Leverage on the big data, YiduCloud develop solutions for hospitals and regulators. We expect Yidu Tech to deliver 11% revenue CAGR in FY21-24E on rising number of active users (from 95 in FY21  122 in FY24E) and higher ARPU (2% CAGR in FY21-24E).

Life sciences solutions create high value-add to customers Yidu Tech began providing life science solutions that cover the entire lifecycle of the clinical development of a drug or medical device in 2H17. There are three categories of solutions including analytic-driven clinical development, real-world evidence (RWE) based research and evidence-based digital commercialization. As Yidu Tech life sciences solutions significantly shortened new drugs/ medical device development time, pharmaceutical, biotech and medical device companies are increasing adoption, reflected by high revenue retention rate of 141% in FY21. We expect life sciences solutions to deliver 81% revenue CAGR in FY21-24E, mainly driven by increasing number of customers (52% CAGR).

New revenue stream from health management platform Yidu Tech started to offer personal health management services via internet hospital platform under the brand “CausaHealth” in Feb 2020. It also launched “CausaCloud” solutions to insurance companies. We expect health management platform and solutions to ramp up from low base and deliver 61% revenue CAGR in FY21-24E.

Initiate at BUY We expect Yidu Tech revenue to grow from RMB867mn in FY21 to RMB2,772mn in FY24E (47% CAGR). We initiate coverage on Yidu Tech with BUY recommendation and target price of HK$43.41. Our SOTP valuation implied 20x FY23E P/S, in-line with life science solution peers.

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Focus Charts

Figure 1: China healthcare big data solutions market Figure 2: China healthcare big data solutions to grow at 40% CAGR in FY19-24E penetration is low (RMB bn) (%) 70 70% 20% 60 60% 18% 16% 50 50% 14% 40 40% 12% 30 30% 10% 18% 19% 8% 20 20% 6% 10 10% 4% 9% 0 0% 2% 2015 2017 2019 2021E 2023E 3% 0% China healthcare big data solutions market size Hospital sector Government Life Sciences Overall YoY sector sector

Source: EY Source: EY

Figure 3: Yidu Tech revenue to grow at 47% CAGR in Figure 4: Life sciences solution contribution is FY21-24E expected to reach 40% in FY24E

(RMB mn) 100% 3,000 90% 21% FY21-24E CAGR: 47% 28% 80% 36% 45% 46% 2,500 70% 67% 60% 78% 40% 2,000 36% 50% 29% 40% 21% 1,500 30% 34% 20% 18% 38% 29% 32% 35% 1,000 10% 22% 11% 10% 0% 0% 500 FY18 FY19 FY20 FY21 FY22E FY23E FY24E Big data platform and solutions 0 Life sciences solutions FY18 FY19 FY20 FY21 FY22E FY23E FY24E Health mgmt platform and solutions

Source: Company data, CMBIS estimates Source: Company data, CMBIS estimates

Figure 5: Life sciences solution ARPU and revenue Figure 6: Operating loss is expected to narrow in retention rate FY22-24E

(RMB'000) (%) 100% 3,500 180% 3,000 160% 0% 140% FY20 FY21 FY22E FY23E FY24E 2,500 120% -100% 2,000 100% -200% 1,500 80% 60% -300% 1,000 40% -400% 500 20% 0 0% -500% FY18 FY19 FY20 FY21 FY22E FY23E FY24E Life sciences solutions ARPU Revenue retention rate Gross margin Operating margin Net margin

Source: Company data, CMBIS estimates Source: Company data, CMBIS estimates

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Company Overview

Yidu Tech, founded in 2014 and listed on HKEx in Jan 2021, ranked No.1 in terms of revenue among all healthcare big data solution providers in China in 2019 with 5.0% market share, according to EY. Yidu Tech offers healthcare solutions built on big data and AI technologies.

In 2017, Yidu Tech began to monetize through its proprietary data intelligence infrastructure – YiduCore. Building YiduCore through processing and analyzing over 1.7bn healthcare records from 400mn patients in 500 hospitals, upon authorization, Yidu Tech developed a suite of analytics-driven healthcare solutions for hospitals, regulators, life science companies, pharmaceutical, biotech and medical device companies, and insurance companies.

Figure 7: Yidu Tech key businesses Health management platform RMB mn Big data platform and solutions Life sciences solutions and solutions Launched 2015 2017 2020

Products Data processing and application Real-world evidence (RWE)-based Personal health management platform for hospitals, regulators research and commercialization platform, insurance technology and and policy makers solutions disease management solutions Customers Hospitals, regulators and policy Pharmaceutical, biotech and Patients and insurance companies makers medical device companies Pricing model One-off project cost and recurring Charge on time-and-material basis One-off consultation fee, take-rate maintenance fee of insurance premium, sales of drugs, project implementation fee FY21 No. of active 95 (+12% YoY) 108 (+46% YoY) 5mn customers Avg. revenue per RMB4.2mn (-3% YoY) RMB1.7mn (+23% YoY) RMB50.4 active customer Revenue 402 184 252 as % of total 46% 21% 29% YoY 8% 29% 353% Source: Company data

Figure 8: Yidu Tech business milestones The Company launched CausaHealth, as part of its The Company launched The Company launched The Company launched its personal health management YiduCore and DPAP regulator and policy maker open big data platform, platform and solutions platform solutions business “Eywa” business 2015 2018 2019 2020

2014 2017 2019 2020 The Company’s business The Company launched life The Company launched The Company built regional was established as one of sciences solutions business CausaCloud, its insurance healthcare platforms for the pioneering healthcare technology solutions certain regulators and policy data intelligence companies business makers to monitor, predict in China and manage the development of COVID-19

Source: Company data

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Industry landscape

China healthcare big data solutions market size is expected to grow from RMB10.5bn in 2019 to RMB57.7bn in 2024 (40.5% CAGR) with penetration rate rise from 7.2% to 16.2%, according to EY estimates. We identified 3 types of providers that Yidu Tech is competing against: traditional IT companies, traditional CROs and healthcare big data solution specialists. We think LinkDoc is the closest peers and Yidu Tech prevails in hospital coverage (500 for Yidu Tech vs. 330 for LinkDoc) and the number of healthcare records collected (400mn for Yidu Tech vs. 2.5mn for LinkDoc).

China’s healthcare industry accelerating digitalization investment China is the second largest healthcare market in the world in terms of national healthcare expenditure at US$931.4bn in 2019, according to EY. China has invested heavily in the informatization of the healthcare system in the past decade. Integrating technology infrastructure to connect, standardize and analyze the data, and developing healthcare big data applications are needed to realize the value of the tremendous healthcare data generated in China.

Total amount of informatization investment in China’s healthcare industries was RMB145.6bn in 2019 and is expected to grow at 19.6% CAGR to RMB356.7bn in 2024. Life sciences companies’ CRO (contract research organizations) investment took up the largest part of current healthcare informatization investment, contributed about 40% of China’s total in 2020. This includes investment in outsourced research and drug development services from pharmaceutical, biotech and medical device companies.

Figure 9: China’s healthcare industry total Figure 10: China’s healthcare informatization informatization investment investment (by segment) (RMB bn) 400 25% Digital Commercialization 350 Investment 20% 25% Hospital IT 300 Investment 24% 250 15% 200 RWE Investment 150 10% 2% 100 Government 5% 50 IT Investment CRO 8% 0 0% Investment 2015 2017 2019 2021E 2023E 41% China's healthcare industry total informatization investment YoY Source: Company data, EY Source: Company data, EY

Figure 11: Big data solutions in China for different stakeholders in the healthcare sector Stakeholders Big data solutions

 Data integration and processing platforms  Clinical data repositories Hospitals  Disease registries and knowledge base  Smart disease intervention solutions  Other solutions for smart hospital management and patient follow-up management  Data integration and connection at various administrative levels Regulators and  Value-based healthcare expenditure analysis and control policy makers  Drug distribution and rational use monitoring  Public health and epidemic monitoring

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 Digital CRO solutions which accelerate the drug development process and lower costs  Advanced real-world evidence (RWE) solutions which analyze massive amount of RWD to generate Life sciences insights and evidence for scientific and commercial purposes companies  Digital commercialization solutions to better serve clinicians risk prediction and alert tools for patient to drive improved healthcare outcomes  Personal health profiling, health education and management program, smart disease intervention Individuals tools, insurance product design, virtual doctor and remote healthcare. Source: EY, CRO, RWE and digital commercialization are grouped as the life sciences sector

China healthcare big data solutions demand to grow at 40% CAGR China healthcare big data solutions market size (measured by sales of healthcare big data solution service providers) is expected to grow from RMB10.5bn in 2019 to RMB57.7bn in 2024 (40.5% CAGR). The overall healthcare big data solutions penetration rate, which refers to the amount of sales revenue of healthcare big data solutions as a % of total amount of healthcare informatization investment in China is expected to rise from 7.2% in 2019 to 16.2% in 2024 of which Life Sciences should see the biggest growth at 52.8% CAGR between 2019 and 2024E, according to EY estimates.

Figure 12: China healthcare big data solutions Figure 13: Penetration of healthcare big data market size solutions (by sector) (RMB bn) (%) 70 70% 20% 60 60% 18% 16% 50 50% 14% 40 40% 12% 30 30% 10% 18% 19% 8% 20 20% 6% 10 10% 4% 9% 0 0% 2% 2015 2017 2019 2021E 2023E 3% 0% China healthcare big data solutions market size Hospital sector Government Life Sciences Overall YoY sector sector

Source: EY report (2020) Source: EY report (2020)

Figure 14: Growth drivers for big data solutions in China Market size 2019-2024 Sector Growth drivers (2019) CAGR  Required to establish an independent clinical information database to evaluate healthcare services quality and medical information retrieval. Hospitals RMB5.5bn 28.9%  Demanded to improve research and evidence-based treatment capabilities.  Required to connect with regulators and policy makers to support healthcare reform (三医联动).

 National strategies to enhance big data application in China. Regulators  Increasing supervision of the healthcare supply chain to reduce healthcare and policy RMB1.6bn 42.8% costs and reallocate healthcare resources. makers  Requirement for stronger epidemic response such as rolling out a nationwide epidemiology reporting system.  Growing demand for R&D efficiency improvement. Life sciences  Increasing requirements for real-world studies as evidence for drugs RMB3.4bn 52.8% companies commercialization.  Emerging requirement for innovative business models. Source: EY

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Competitive landscape The entry barrier to China’s healthcare big data solution industry is high, hurdles include (i) coverage of hospitals, (ii) accumulating follow-up data, and (iii) advanced technology capabilities. We identified 3 types of service providers that Yidu Tech is competing against including (i) traditional IT companies, (ii) traditional CROs and (iii) healthcare big data solution specialists. We think LinkDoc is the closest peers in terms of business model. We believe Yidu Tech prevails over LinkDoc given larger hospital coverage (500 for Yidu Tech vs. 330 for LinkDoc) and higher number of healthcare records collected (400mn for Yidu Tech vs. 2.5mn for LinkDoc). Also, LinkDoc is relatively niche and specializes in oncology while Yidu Tech disease registries cover over 50 disease areas.

(1) Traditional IT companies: Traditional healthcare IT service companies mainly provide hardware and software products/ services such as HIS (Hospital Information System) and EMR (Electronic Medical Record) to hospitals, regulators and policy makers with limited coverage of life science sector. Some of these companies are also providing big data solutions modules for smart city projects.

Figure 15: Traditional healthcare IT services providers Winning Health Neusoft B-soft Ticker 300253 CH 600718 CH 300451 CH Established 1994 1991 1997 FY20 (RMB mn) Revenue (By sector) 2,267 7,622 1,633 - Healthcare 2,264 1,434 1,364 - Non-healthcare 2 6,188 269 Revenue (By product) - Hardware 20% - - - Software 55% 86% 36% - IT services 19% 12% 41% - Others 7% 2% 23% Blended GPM 54.1% 26.2% 55.4% - Healthcare GPM 54.1% 40.1% 57.8% R&D (RMB mn) 471 960 272 - as % of revenue 20.8% 12.6% 16.7% Total employees 5,294 17,071 3,368 - R&D 1,953 13,748 1,103 Source: Company data, CMBIS

(2) Traditional CROs: Traditional CROs (Contract Research Organizations) provides R&D services covering discovery, pre-clinical and clinical stages such as drug safety, clinical trial monitoring, data management, etc. to life sciences companies. For some cases, traditional CROs will collaborate with emerging healthcare big data solution providers to enhance the clinical trial process.

Figure 16: Traditional CROs AppTec Tigermed Wuxi Bio Frontage Asymchem Ticker 2359 HK/ 603259 CH 3347 HK/ 300347 CH 2269 HK 1521 HK 002821 CH Established 2000 2004 2015 2018 1995 FY20 (RMB mn) Revenue 16,535 3,192 5,612 20 3,137 - China 25% 60% 44% 27% 12% - Overseas 75% 40% 56% 73% 88% CRO revenue 1,169 3,192 n.a. n.a. n.a. Blended GPM 37.8% 47.1% 45.1% 33.0% 46.3% CRO service GPM 14.2% 47.1% n.a. n.a. n.a. Source: Company data, CMBIS

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(3) Healthcare big data solution specialists: Healthcare big data solution specialists possess big data/ AI technologies to integrate data science, commercial consulting, and RWE to general solutions covering clinical development, public health monitoring and medical sciences research. According to EY report, there are around 30 key healthcare big data solution specialists in China market.

Figure 17: Healthcare big data solution specialists Yidu Cloud LinkDoc Ticker 2158 HK n.a. Established 2014 2014 RMB mn FY21 (Mar-YE) FY20 Revenue (By sector) 867 942 - Life science solutions 184 120 - Others 683 822 Blended GPM 37.8% 8.3% - Life science solutions GPM 21.7% 26.1% R&D (RMB mn) 222 87 - as % of revenue 25.6% 9.2% Total employees 1,201 1,250 - R&D 456 199 Collaborated hospitals 500 330 IIIA hospitals 120 191 Patients record (mn) 400 2.5 Healthcare record (mn) 1,700 n.a. No. of life science customers 108 169 Source: Company data, CMBIS

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Core data-intelligence infrastructure – YiduCore Proprietary data-intelligence infrastructure YiduCore is the proprietary data intelligence infrastructure built by Yidu Tech. It is built through processing and analyzing 1.7bn healthcare records from 400mn patients upon authorization. Based on this “medical brain” YiduCloud developed a suite of data-analytics healthcare solutions for the healthcare industry.

YiduCore comprises 3 layers:

1) Data processing capabilities: Allow the company to aggregate and convert the raw and scattered data on the IT systems of hospitals in China into computable, structured and standardized data with speed, accuracy and cost-efficiency. 2) Medical knowledge, insights and disease models: These models are continuously reinforced and expanded as they are applied to drive the data- analytics driven solutions. 3) Scenario specific operations and service capabilities: YiduCloud develops scenarios specific solutions to customers to achieve their targets.

Figure 18: YiduCore

Source: Company data, CMBIS

Data arrangements and security One of the biggest concern over healthcare big data/ AI products is not the underlying technology but the privacy and data security. YiduCloud ensures healthcare products comply with applicable laws as:

1) Healthcare data is de-identified: YiduCloud has its own de-identification technologies to detect individually identifiable information and such information will be encrypted without human intervention to protect patients’ privacy. 2) Data remains at customers’ private cloud: At all times, the data of YiduCloud remain at customers’ own private cloud. After YiduCloud sets up each data platform and delivers to customer, Yiducloud licenses the customer to use and operate the platform and the solutions as YiduCloud owns the IP of such products. 3) Data of each hospital customer is not connected with each other: YiduCloud created a cloud platform environment that customers are disconnected with external internet by using firewall and whitelist to manage the entry and exit of the platform. Data of each hospital customer is thus not inter-connected.

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Big data platform and solutions

YiduCloud launched big data platform and solutions in 2015. It consists of data processing and application platform that aggregate raw data and process them into structured and standardized data. Leverage on the big data, YiduCloud develops solutions for hospitals and regulators. We expect Yidu Tech big data platform to deliver 13% revenue CAGR in FY21-24E on rising number of active users (from 95 in FY21  121 in FY24E) and higher ARPU (5% CAGR in FY21-24E).

Stable growth in big data platform and solutions Yidu Tech derived 46% of revenue from Big data platform and solutions in FY21. We expect revenue in FY21-24E to grow at 13% CAGR on 1) increasing number of active users and 2) higher ARPU. In FY21, Yidu Tech added 10 active customers in this segment to 95 in total, of which 80% (or 76) are hospital customers and 20% (or 19) are regulators and policy makers. Active customers referred to those who have installed YiduCloud big data platform or purchased standalone solutions during the period. Average revenue per active customers slightly declined 3% YoY to RMB4.2mn.

Figure 19: YiduCloud big data platform revenue and Figure 20: Big data platform revenue mix (by YoY customer type)

(RMB mn) Hospital customers 700 FY21-24E CAGR: 13% 7% 600 Others 28% 500

400

300 Regulators and policy 200 makers 65% 100

0 FY18 FY19 FY20 FY21 FY22E FY23E FY24E

Source: Company data, CMBIS estimates Source: Company data, FY20, CMBIS estimates

Figure 21: YiduCloud big data platform active users Figure 22: YiduCloud big data platform ARPU 140 (RMB'000) 120 6,000 FY21-24E CAGR: 5%

100 5,000

80 4,000

60 3,000 40 2,000 20 1,000 0 FY18 FY19 FY20 FY21 FY22E FY23E FY24E 0 Regulators and policy makers Hospital customers FY18 FY19 FY20 FY21 FY22E FY23E FY24E

Source: Company data, CMBIS estimates Source: Company data, CMBIS estimates

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Solutions for hospitals 1) Market research: YiduCloud helps hospitals integrate data from multiple information systems to establish a patient’s full life-cycle model. This helps medical researchers to form research hypothesis more efficiently. Also, it facilitates doctors to find research papers and identify research topics related to specific disease through real-world data and recommendation.

Figure 23: Disease registries and patient follow-up

Source: Company data

2) Clinical diagnosis and treatment: YiduCloud developed disease models and rules for diagnosis and treatment in order to standardize certain procedures traditionally handled by doctors. Leverage on the medical data accumulated in YiduCore, the solution helps doctors to improve diagnose and treatment efficacy.

Figure 24: Clinical Decision Support System (CDSS)

Source: Company data

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3) Hospital operations management: This helps hospitals improve service quality, healthcare effectiveness and operational efficiency. Current product covers over 20 analytical topics such as outpatient and emergency room service, inpatient service, surgery quality and medical quality and more than 100 key performance indicators such as distribution of diseases for outpatient visits, average length of stay, etc.

Figure 25: Outcome-based management platform

Source: Company data

Solutions for regulators 1) Public health monitoring: It includes adverse drug reaction monitoring, drug fraud and abuse detection, medical resource, etc.

2) Epidemic response: It consists of infectious diseases monitoring platform and epidemic response system.

3) Population health management: It helps health authority to develop applications that individuals can access personal record on mobile.

Figure 26: Outcome-based management platform

Source: Company data

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Part of big data solution pricing is recurring Big data platform pricing is mainly one-off, which includes 1) Upfront platform development and installation on a cost-plus approach, and 2) Maintenance fees at a fixed % of the upfront platform development and installation fees.

Part of Solutions pricing includes 1) One-off implementation and license fee (revenue for term-based license is recognized over the term, and 2) Recurring subscription fee.

Figure 27: Big data platform and solutions Customer Offerings Value-add Monetization method Type Big Data Platform  Aggregate and convert raw data  Upfront platform building fee  DPAP in systems into structured and  Maintenance fee  Eywa standardized data Solutions  Leverage data to drive higher  Medical Research  Perpetual or term-based quality and more efficient license/ subscription fee Hospitals  Clinical Diagnosis and medical research, clinical Treatment  Maintenance and data diagnosis and treatment and processing as a service fee  Hospital Operations operational management. Management  Enable efficient collaboration  Upfront platform deployment fee Research Network and coordination for large-scale  Maintenance and data real-world research processing as a service fee  Aggregate and convert multi-  Upfront platform building fee Big Data Platform source data from healthcare institutions and government  Maintenance fee Regulators agencies into structured data and policy  Perpetual or term-based makers Solutions  Leverage data to enhance license/ subscription fee  Public health monitoring public health monitoring and  Epidemic Response  Maintenance and data regulatory oversight processing as a service fee  Population health management Source: Company data

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Life sciences solutions

Yidu Tech began providing life science solutions in 2H17. Its solutions cover the entire lifecycle of the clinical development of a drug or medical device and are grouped into three categories including analytic-driven clinical development, real- world evidence (RWE) based research and evidence-based digital commercialization. We expect life sciences solutions to deliver 81% revenue CAGR in FY21-24E, mainly driven by increasing number of customers (52% CAGR).

Strong value add to customers, reflected in higher retention rate Yidu Tech derived 21% of revenue from life sciences solutions in FY21 and we expect revenue contribution to reach 40% by FY24E with revenue CAGR of 81%. In FY21, Yidu Tech added 34 active customers in this segment to 108 in total, of which 75% (or 81) are pharmaceutical, biotech and medical device companies and 25% (or 27) are others such as traditional CROs. As Yidu Tech life sciences solutions significantly shortened new drugs/ medical device development time, pharmaceutical, biotech and medical device companies are increasing adoption, reflected by high revenue retention rate of 141% in FY21. We expect active customers to grow at 52% CAGR in FY21-24E and average revenue per active customer to increase at 20% CAGR during the same period of time.

Figure 28: Yidu Tech life science solutions revenue Figure 29: Life science solutions revenue (by and YoY product type)

(RMB mn) 1,200 FY21-24E CAGR: 81%

1,000

800 Commercialization solutions Clinical devlopment 600 45% and RWE-based research 400 55%

200

0 FY18 FY19 FY20 FY21 FY22E FY23E FY24E

Source: Company data, CMBIS estimates Source: Company data, CMBIS estimates

Figure 30: Life sciences solution active users Figure 31: ARPU and revenue retention

400 (RMB'000)

350 FY21-24E CAGR: 52% 3,500 180% 3,000 160% 300 140% 2,500 120% 250 2,000 100% 200 1,500 80% 60% 150 1,000 40% 500 100 20% 0 0% 50 FY18 FY19 FY20 FY21 FY22E FY23E FY24E Life sciences solutions ARPU 0 FY18 FY19 FY20 FY21 FY22E FY23E FY24E Revenue retention rate

Source: Company data, CMBIS estimates Source: Company data, CMBIS estimates *retention rate for pharmaceutical, biotech and medical device companies

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Yidu Tech began providing life science solutions in 2H17 to life sciences industry players to help them reduce the time and costs of drug and medical device development while enhancing regulatory approval and commercial success.

Yidu Tech solutions cover the entire lifecycle of the clinical development of a drug or medical device and are grouped into three offering categories of 1) Analytic-driven clinical development, 2) real-world evidence (RWE)-based research and 3) evidence-based digital commercialization.

Figure 32: Life sciences solutions overview

Source: Company data

Analytics-driven clinical development Yidu Tech clinical development solutions help customers develop and optimize clinical development plans and study protocols, conduct feasibility studies, and develop trial operation strategies and patient recruitment plans in connection with clinical trials supported by real-world evidence.

Figure 33: Analytics-driven clinical development Types of services Details

 YiduCloud helps customers formulate drug development strategies, including indication Clinical development and selection and portfolio prioritization. YiduCloud improves clinical trial protocol design by regulatory affairs selecting the right patients with refined inclusion/ exclusion criteria, reduce patient burdens by consulting designing better trial procedures and mitigate treatment risks.  YiduCloud offers services that cover the end-to-end execution of a clinical trial. It includes Operation services project management and monitoring, data management and statistical reporting as well as site management organization (SMO) services. Source: Company data

PLEASE READ THE ANALYST CERTIFICATION AND IMPORTANT DISCLOSURES ON LAST PAGE 16 7 Jul 2021

Figure 34: YiduCloud approaches to enhance clinical trials efficiency

Source: Company data

Real-world Evidence (RWE)-based research Real-world evidence is used by pharmaceutical, biotech and medical device companies when clinical trials cannot account for the entire patient population of a particular disease.

Since the use of drugs in traditional clinical trials mostly occurs in a strictly controlled and optimal research environment, it is difficult to determine the generalizability of the trial results in real clinical practice. Through analyzing patients’ use of the drug and the effects in the real world after the drug is launched and comparing these findings with the clinical data under optimal conditions, YiduCloud proves the safety and effectiveness of the drug in the real world.

Figure 35: Real-world evidence (RWE)-based research types Types of research Details  Help pharmaceutical customer conduct real-world study on the cost-effectiveness of a new Health economics study drug to support admission application to catalog of drugs covered by national medical insurance system.  Help pharmaceutical companies monitor, analyze and identify potential adverse events of Post-market safety study their therapeutic products post commercialization. Comparative  Analyze the comparative advantages between different therapeutic products and clinical effectiveness research regimes in selected patient groups. Clinical outcome analysis  Analyze and identify new subgroups of patients who can benefit from certain therapeutic of patient subgroups products beyond original indications.

Registry study  Evaluate the efficacy of treatment for certain disease.

Patient-reported outcome  Evaluate the quality of life of patients or full lifecycle clinical outcomes to understand the study clinical benefits that the target therapeutic product brings to patients in the real-world setting. Source: Company data

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Evidence-based digital commercialization YiduCloud develops digital tools for pharmaceutical and medical device companies to support them to convert their traditional patient management activities from offline to online full lifecycle patient management and engagement.

Figure 36: Evidence-based digital commercialization business Types of research Details  Consulting services to pharmaceutical companies to help them design an optimal strategy and Consulting implementation roadmap for them to convert their traditional patient management activities from offline to online  Patient management platforms that enables doctor-to-patient interactions such as online Integrated patient health consultation and remote patient follow-up, doctor-to-doctor interaction such as medical management solutions knowledge sharing, medical training and academic learning. Source: Company data

Figure 37: YiduCloud digital commercialization illustration

Source: Company data

PLEASE READ THE ANALYST CERTIFICATION AND IMPORTANT DISCLOSURES ON LAST PAGE 18 7 Jul 2021

Health management platform and solutions

Yidu Tech started to offer personal health management services via internet hospital platform under the brand “CausaHealth” in Feb 2020. It also launched “CausaCloud” solutions to insurance companies. We expect health management platform and solutions to ramp up from low base and deliver 61% revenue CAGR in FY21-24E.

Emerging revenue stream Yidu Tech derived 29% of revenue from health management platform and solutions in FY21 and we expect revenue contribution to reach 38% by FY24E with revenue FY21-24E CAGR of 61%. Yidu Tech health management platform and solutions gross margin improved to 40.7% in FY21 (vs. 13.9% in FY20) as revenue mix shifted towards platform solutions for enterprises. We estimate platform solutions contributed 32% of FY21 revenue while CausaHealth (personal health management services) and CausaCloud (insurance tech) attributed 40% and 28% of FY21 revenue.

Figure 38: Yidu Tech health management platform Figure 39: Yidu Tech health management platform and solutions revenue and solutions revenue mix (FY21)

(RMB mn) 1,200 FY21-24E CAGR: 61%

1,000 CausaCloud (insurance tech) CausaHealth 800 28% 40% 600 Health 400 management platform for large 200 enterprise 32%

0 FY18 FY19 FY20 FY21 FY22E FY23E FY24E

Source: Company data, CMBIS estimates Source: Company data

Yidu Tech started to offer personal health management services via internet hospital platform under the brand “CausaHealth” in Feb 2020. Users can consult doctors online via the platform and receive personal health management services or disease management services by purchasing health plans (such as drugs/ insurance) from Yidu Tech’s platform.

Patients either pay a one-off consultation fee (RMB200) each time they see a doctor or purchase a personalized health plan covering one or more quarters (RMB50 to RMB200 per annum) as they prefer. Yidu Tech charges a take rate of 10-30% for each insurance policy sold or renewed that is bundled with the health management services or disease management services. Yidu Tech currently does not charge fees from partnered pharmacies while patients pay the pharmacies directly based on price and quantity of drugs they plan to purchase. Yidu Tech does not need a separate license to operate internet hospital platform as it cooperates with Wudang Innovation Community Sanitation Service Centre which has obtained the license for practicing of medical institutions.

As of 31 Mar 2021, number of paying users on CausaHealth platform exceeded 5mn. Yidu Cloud revenue consists of online consultation fees, health management service fees, sales of drugs procured from pharmaceutical companies to partnering pharmacies on CausaHealth platform and take-rate of insurance premium.

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Figure 40: Health management platform Types of services Details  Yidu Tech collaborates with physical hospital partners to establish internet hospitals such that medical consultations and personalized care services can be remotely provided to patients. Internet hospital  Yidu Tech’s internet hospital platform is connected to third-party retail pharmacies such that patients can order drugs after consultation with doctors on Yidu Tech’s platform.  Yidu Tech provides doctors with a range of AI assistance tools such as follow-up reminder, Patient management automatically generated patient survey and compliance monitoring etc. tools  In addition, Yidu Tech’s wearable devices allow doctors to actively track the health conditions of the patients who wears the device.  Yidu Tech’s provides clinical decision support tools to empower doctors to provide more precise Personalized patient and personalized clinical diagnosis to customers. These AI clinical services include helping care services doctors identify the correlation between patients’ disease with demographic information. Source: Company data

Figure 41: CausaHealth user interfaces

Source: Company data

Insurance technology and disease management solutions Yidu Tech also offers solutions to insurance companies and agencies under the brand “CausaCloud”. The data that Yidu Tech stores for CausaCloud include 1) health management service data directly filled out by insures when they purchase insurance products through the app, or when they request insurance claim processing services and 2) insurance product data provided by insurance companies such as data regarding contents of their insurance products and fee models.

Yidu Tech usually charges customers a one-off design fee, which is typically payable in instalments. For innovative insurance product design services, Yidu Tech charges service fees ranging from 10-20% of the insurance premium fee for each transaction. For intelligent insurance underwriting solutions, Yidu Tech charges from RMB2-3mn. For Intelligent claim processing solutions, Yidu Tech charges RMB3-5mn.

Hui Min Bao is a CausaCloud product, which can be used as a supplementary insurance product of the existing national social medical insurance. Yidu Tech launched Hui Min Bao in Jul 2020 and insurance solutions will be the main revenue driver for CausaCloud going

PLEASE READ THE ANALYST CERTIFICATION AND IMPORTANT DISCLOSURES ON LAST PAGE 20 7 Jul 2021 forward. Hui Min Bao must be purchased by the insured with the national social medical insurance in the local city. In most cities, one can buy Hui Min Bao with a validity period of one year from RMB60-100. At present, Hui Min Bao is a one-year product in various cities, and it needs to be renewed every year. Yidu Tech charges a fixed % of the premium paid to the insurance companies and record revenues generated from Hui Min Bao under CausaCloud. In addition to generating revenues for Yidu Tech, Hui Min Bao helps bring in significant user traffic as well. Yidu Tech has launched Hui Min Bao in 4 cities including , , and .

Figure 42: Insurance technology solutions Types of services Details

 Leveraged on YiduCore, Yidu Tech can efficiently analyze clinical pathway, demographic Innovative insurance composition, cost structure and disease outcome for different type of diseases and different product design stages of the diseases, thereby helping insurance companies determine pricing, drug list and services service terms.  YiduTech can recognize and extract healthcare information from the medical records and Intelligent insurance physical examination records submitted by the insurees. This can help increase the efficiency underwriting solutions and accuracy of insurance underwriting process for insurance companies. Intelligent claim  Solutions include data processing, claim verification and intelligent settlement. Yidu Tech then processing solutions assists claim verification analysts through liability model, fraud model and risk control model. Source: Company data

Figure 43: Life cycle of insurance products

Source: Company data

PLEASE READ THE ANALYST CERTIFICATION AND IMPORTANT DISCLOSURES ON LAST PAGE 21 7 Jul 2021

Financial analysis Revenue to grow at 47% CAGR in FY21-24E We expect Yidu Tech revenue to grow at 47% CAGR to RMB2,772mn in FY24E from RMB1,246mn in FY21.

 Big data platform and solutions YiduTech derived 46% of revenue from big data platform and solutions in FY21. This segment consist data processing, application platform and other solutions targeting hospitals, regulators and policy makers. We expect revenue to grow further at 13% CAGR in FY21-24E, on growing active users (8% CAGR to 121) and higher revenue per active customer (5% CAGR to RMB4.8mn).

Yidu Tech achieved 183% revenue CAGR in FY18-21, largely driven by expanding number city/ provincial level regulators and policy makers that have higher ARPU. ARPU was up by 109% CAGR from RMB465mn in FY18 to RMB4,230mn in FY21.

 Life sciences solutions YiduTech derived 21% of revenue from big data platform and solutions in FY21. Yidu Tech provides analytics-driven clinical development, real-world evidence (RWE)-based research and digital commercialization solutions to pharmaceutical, biotech and medical device companies. We expect revenue to increase at 81% CAGR in FY21-24E, on both surging number of active users (52% CAGR) and average revenue per active customer (20% CAGR) to RMB2.9mn.

Yidu Tech delivered robust revenue growth in FY18-21 at 232% CAGR. Revenue retention rate was high at 141% in FY21, reflecting high repeating revenue from pharmaceutical/ biotech users.

 Health management platform and solutions Yidu Tech derived 29% of revenue from health management platform and solutions in FY21 and we expect revenue CAGR of 61% in FY21-24E. We estimate platform solutions contributed 32% of FY21 revenue while CausaHealth (personal health management services) and CausaCloud (insurance tech) attributed 40% and 28% of FY21 revenue.

Figure 44: Yidu Tech revenue Figure 45: Yidu Tech revenue mix

(RMB mn) 100% 3,000 90% 21% FY21-24E CAGR: 47% 28% 80% 36% 45% 46% 2,500 70% 67% 60% 78% 40% 2,000 36% 50% 29% 40% 21% 1,500 30% 34% 20% 18% 38% 29% 32% 35% 1,000 10% 22% 11% 10% 0% 0% 500 FY18 FY19 FY20 FY21 FY22E FY23E FY24E Big data platform and solutions 0 Life sciences solutions FY18 FY19 FY20 FY21 FY22E FY23E FY24E Health mgmt platform and solutions

Source: Company data, CMBIS estimates Source: Company data, CMBIS estimates

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Gross margin to decrease on mix change Yidu Tech cost of sales primarily consists of cost of sales of hardware and software (49%), followed by employee benefits expenses (31%) and outsourcing service fee (17%). Share based compensation included in cost of sales was minimal (1% in FY21).

Gross margin has improved significantly from -4.1% in FY18 to 37.8% in FY21. However, on revenue mix change, we expect gross margin to come down to 28.2% in FY24E.

 Big data platform and solutions Big data platform and solutions gross margin increased from -5.9% in FY18 to 45.1% in FY21 as revenue mix shifted from lower margin implementation work to higher margin solution and services revenue. We expect gross margin to increase gradually to 47.9% in FY24E.

 Life sciences solutions Life sciences and solutions gross margin improved from 2.1% in FY18 to 21.7% in FY21, primarily due to increased pricing power and higher utilization by pharmaceutical customers. We expect gross margin to reach 25.1% by FY24E.

 Health management platform and solutions Health management platform and solutions gross margin was at 8.8% in FY19 and increased to 40.7% in FY21, driven by increased pricing power of the platform solutions offered to insurance companies and the revenue mix shifted from lower margin solutions to higher margin CausaCloud. We expect gross margin to come down to 20.8% in FY24E on revenue mix change that contribution from higher margin platform solutions for enterprises decline gradually.

Figure 46: Cost of sales mix (FY20) Figure 47: Gross margin (by segment) Others (%) 3% 60% 50% Outsourcing 40% services fee 17% Cost of 30% sales of hardware, 20% software 10% Employee and other benefits goods 0% expenses 49% FY18 FY19 FY20 FY21 FY22E FY23E FY24E 31% -10% Big data platform and solutions Life sciences solutions Health mgmt platform and solutions Others Source: Company data Source: Company data, CMBIS estimates

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Opex ratio declining We expect Yidu Tech to remain in operating loss position in FY22-23E as scale on revenue and gross margin change will offset the declining opex ratio. We observed that Yidu Tech operating loss narrowed from RMB590mn in FY20 to RMB443mn in FY21E as revenue ramped up. Opex ratio decreased from 131.9% in FY20 to 88.9% in FY21. On an adjusted basis that excludes the impact from share based compensation and one-off listing expense, we estimated opex ratio declined from 84.7% in FY20 to 68.5% in FY21. This is mainly related to lower R&D expense from 40.7% in FY20 to 23.5% in FY21E.

Figure 48: Opex ratio Figure 49: margins (%) (%) 60% 100%

50% 0% FY20 FY21 FY22E FY23E FY24E 40% -100%

30% -200%

20% -300%

10% -400%

0% -500% FY20 FY21 FY22E FY23E FY24E

S&M G&A R&D Gross margin Operating margin Net margin

Source: Company data, CMBIS estimates Source: Company data, CMBIS estimates

Figure 50: Opex ratio analysis RMB mn FY18 FY19 FY20 FY21 FY22E FY23E FY24E Selling And Distribution Expenses (49) (101) (171) (239) (323) (433) (557) Administrative Expenses (41) (84) (302) (310) (419) (561) (722) R&D Expenses (154) (258) (264) (222) (300) (402) (517)

Opex ratio %Selling And Distribution Expenses 216.5% 99.3% 30.6% 27.6% 24.8% 22.3% 20.1% %Administrative Expenses 179.5% 81.9% 54.1% 35.7% 32.2% 29.0% 26.1% %Research And Development Expenses 675.9% 252.5% 47.2% 25.6% 23.0% 20.7% 18.7% Total 1071.9% 433.7% 131.9% 88.9% 80.0% 72.0% 64.8%

Adjusted. opex ratio %Selling And Distribution Expenses 197.6% 90.6% 25.4% 25.9% %Administrative Expenses 162.9% 80.1% 18.6% 19.1% %Research And Development Expenses 653.7% 247.1% 40.7% 23.5% Total 1014.3% 417.8% 84.7% 68.5%

Share-based compensation distribution Cost of sales and services - 0 11 7 S&M 4 9 29 15 G&A 4 2 197 94 R&D 5 6 37 18 Total 13 16 273 135

Share based compensation incl. in COGS - 0 11 7 as % of COGS 0% 0% 3% 1% Share based compensation incl. in opex 13 16 262 127 as % of opex 5% 4% 36% 17% Source: Company data, CMBIS

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Working capital improving but free cash flow to remain negative We expect Yidu Tech cash conversion cycle to improve from 48 days in FY21 to 2 days in FY24E on shortened account receivable days from 137 in FY21 to 124 in FY24E as pricing power improves with larger scale.

Although Yidu Tech will remain at net loss position in FY22-24E but its RMB3.5bn cash raised during IPO will be enough for its to keep it net cash position. As such, we do not expect Yidu Tech raise additional capital through debt/ equity in the near term.

Figure 51: Cash conversion Figure 52: Net debt

(%) (RMB mn) 500 5,000 -0.8 450 4,000 400 3,000 350 2,000 -0.9 300 1,000 250 0 FY19 FY20 FY21 FY22E FY23E FY24E -1.0 200 (1,000) 150 (2,000) (3,000) 100 -1.1 (4,000) 50 (5,000) 0 (6,000) -1.2 FY18 FY19 FY20 FY21 FY22E FY23E FY24E Account receivable days Inventory days Net debt/ (cash) Net gearing Account payable days Source: Company data, CMBIS estimates Source: Company data, CMBIS estimates

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Figure 53: Operating model RMB mn FY18 FY19 FY20 FY21 FY22E FY23E FY24E Revenue breakdown Big data platform and solutions 18 46 372 402 473 538 587 Life sciences solutions 5 35 103 184 383 690 1,101 Health mgmt platform and solutions - 11 56 252 416 678 1,051 Total 23 91 530 838 1,272 1,907 2,738

Revenue mix Big data platform and solutions 78% 45% 67% 46% 36% 28% 21% Life sciences solutions 22% 34% 18% 21% 29% 36% 40% Health mgmt platform and solutions 0% 11% 10% 29% 32% 35% 38%

Revenue YoY Big data platform and solutions 160% 710% 8% 18% 14% 9% Life sciences solutions 589% 195% 79% 108% 80% 60% Health mgmt platform and solutions n.a. 417% 353% 65% 63% 55% Total 303% 480% 58% 52% 50% 44%

Gross margin Big data platform and solutions -5.9% 3.2% 33.4% 45.1% 46.0% 46.9% 47.9% Life sciences solutions 2.1% 8.2% 13.4% 21.7% 22.8% 23.9% 25.1% Health mgmt platform and solutions 8.8% 13.9% 40.7% 32.6% 26.0% 20.8% Others 4.0% 2.5% 12.1% 12.1% 12.1% 12.1%

Assumptions Big data platform and solutions No. of active customers 38 57 85 95 105 113 121 …net add - 19 28 10 10 9 8 Avg. revenue per active customer 0.5 0.8 4.4 4.2 4.5 4.8 4.8 (RMB mn) ...YoY 0% 73% 443% -3% 7% 5% 2%

Life sciences solutions No. of active customers 9 37 74 108 173 259 376 …net add - 28 37 34 65 86 117 Avg. revenue per active customer 0.6 0.9 1.4 1.7 2.2 2.7 2.9 (RMB mn) ...YoY 0% 68% 48% 23% 30% 20% 10% Pharma., biotech & med. device co. - 171% 152% 141% 150% 140% 130% revenue retention Source: Company data, CMBIS

Figure 54: Income statement RMB mn FY18 FY19 FY20 FY21 FY22E FY23E FY24E Revenues 23 102 558 867 1,303 1,938 2,772 Cost of sales (24) (96) (412) (540) (859) (1,340) (1,991) Gross Profit (1) 6 147 327 444 598 780 Gross margin -4.1% 5.6% 26.3% 37.8% 34.1% 30.9% 28.2%

R&D (154) (258) (264) (222) (300) (402) (517) SG&A (90) (185) (473) (549) (742) (994) (1,279) Operating Income (245) (437) (590) (443) (598) (798) (1,016) Operating margin -1076.0% -428.1% -105.7% -51.1% -45.9% -41.1% -36.7%

Non-Operating Income (734) (496) (921) (3,250) 10 9 8

Profit Before Tax (978) (933) (1,511) (3,693) (588) (788) (1,008) Income tax (expense) gain (0) (1) (1) (1) (0) (0) (0) Minorities ------Net Income to Shareholders (978) (934) (1,510) (3,700) (589) (790) (1,010) Net margin -4305% -915% -271% -427% -45% -41% -36%

EPS (1.39) (1.36) (2.15) (4.00) (0.64) (0.85) (1.09) Source: Company data, CMBIS

PLEASE READ THE ANALYST CERTIFICATION AND IMPORTANT DISCLOSURES ON LAST PAGE 26 7 Jul 2021

Valuation Initiate at BUY with target price of HK$43.41 We initiate coverage on Yidu Tech with BUY recommendation and target price of HK$43.41. We derived our target price with SOTP method and applied 60% premium on respective business segment peers’ FY22E P/S to reflect 1) faster growth and 2) more advanced technology and hence higher margin upside in the long term.

Figure 55: SOTP valuation Target Business segment (RMB mn) FY23E revenue Implied mkt cap multiple (x) Big data platform and solutions 538 17 9,153 Life sciences solutions 690 31 21,393 Health mgmt platform and solutions 678 12 8,137 Total 38,682 Exchange rate 0.83 Target price (HK$) 43.41 Implied FY23E P/S 19.96 Source: Bloomberg, CMBIS

Figure 56: Peers’ valuation Market Sales P/S/Growth 2158 HK Cap Price P/S P/E CAGR Company Ticker Rating (US$ bn) (LC) FY21E FY22E FY21E FY22E FY20-23E FY22E Big data platform and solution providers Yidu Tech 2158 HK BUY 4.4 37.35 25.6 17.2 n.a. n.a. 47% 0.4 Winning 300253 CH NR 5.6 16.86 12.3 9.8 57.3 42.8 24% 0.4 Health Neusoft 600718 CH NR 1.9 9.66 1.3 1.2 42.0 33.3 n.a. n.a. B-soft 300451 CH NR 2.1 8.77 6.2 4.8 29.6 22.6 26% 0.2 Veeva System VEEV US NR 48.3 316.12 33.4 26.5 111.2 90.5 26% 1.0 Mean 13.3 10.6 60.0 47.3 25% 0.5 Life science solution providers Wuxi AppTec 2359 HK NR 66.2 166.80 19.4 14.9 91.9 70.7 31% 0.5 Tigermed 3347 HK NR 21.4 162.60 33.0 25.4 81.6 65.6 28% 0.9 Wuxi Bio 2269 HK NR 69.0 126.40 49.8 34.4 173.1 120.5 50% 0.7 Frontage 1521 HK NR 1.9 7.04 10.8 8.3 75.5 53.3 35% 0.2 Asymchem 002821 CH NR 12.8 340.21 19.7 15.1 84.2 63.4 31% 0.5 Mean 26.5 19.6 101.3 74.7 35% 0.6 Health management platform providers JD Health 6618 HK NR 42.7 104.20 10.0 6.9 288.2 175.2 43% 0.2 Ali Health 241 HK NR 26.6 15.30 10.3 7.2 326.6 289.5 58% 0.1 PA Good 1833 HK NR 12.9 87.30 9.3 7.0 n.a. n.a. 35% 0.2 Docor Teladoc TDOC US NR 25.4 164.26 12.6 9.8 n.a. n.a. 43% 0.2 Avg. Mean 10.5 7.7 307.4 232.4 45% 0.2 Source: Bloomberg, CMBIS

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Figure 57: 12M forward P/S chart Figure 58: 12M forward P/S band

35 HK$mn 33 70,000 31 29 60,000 27 50,000 25 23 40,000 21 30,000 19 17 20,000 15 Feb-21 Mar-21 Apr-21 May-21 Jun-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21 Mkt Cap 17.4x 21.7x 1-yr fwd PS Mean Mean +1SD Mean-1SD 26.1x 30.5x 34.8x

Source: Company data, CMBIS Source: Company data, CMBIS

PLEASE READ THE ANALYST CERTIFICATION AND IMPORTANT DISCLOSURES ON LAST PAGE 28 7 Jul 2021

Company profile Management background Figure 59: Management background Name Position Age Background

Ms. Gong has served as the Chairlady of the board of directors since Dec 2014. She is the founder of Beijing Huixu Jintong Investment Center (L.P.) (北京惠旭金通投资中 GONG Yingying 心（有限合伙）). She also founded Guizhou Province Xiao Yingying Charity CEO 36 (宫盈盈) Foundation (贵州省笑盈盈慈善基金会) in March 2019. Ms. Gong received her EMBA from Cheung Kong Graduate School of Business in October 2012 and her bachelor’s degree in economics from the London School of Economics and Political Science in July 2005. Ms. Yang has served as the CFO since Sep 2017. Prior to joining the Group, She worked at GIC from February 2011 to September 2017, with her last position as vice YANG Jing president. Ms. Yang holds a Master of Business Administration degree from the CFO 41 Wharton School of the University of Pennsylvania awarded in May 2009 and a (杨晶) master’s degree in international economics from Peking University awarded in June 2004. Ms. Yang received her bachelor’s degree in international economics from Peking University in July 2002. Dr. Yan has served as the Chief AI Scientist of the Group since Dec 2017. Before joining the Group in December 2017, He worked at Microsoft (China) Co., Ltd. YAN Jun between July 2006 and November 2017 in various research roles. He has published CTO 841 over 80 papers in prestigious academic publications and conferences. Dr. Yan holds (闫峻) a Ph.D. in applied mathematics from Peking University awarded in July 2006 and received his bachelor’s degree in computational mathematics from Jilin University in July 2001. Ms. Zhang has served as the SVP since Jul 2020. Prior to joining the Group, She SVP (big ZHANG Shi worked at Microsoft (China) Co., Ltd. in a variety of roles. Ms. Zhang received her data 47 (张实) bachelor’s degree in electrical engineering from the Southwest Jiaotong University in platform) July 1995. Mr. He has served as the CIO since Dec 2015. Before joining the Group, he worked as a product director at Alibaba Group from September 2012 to December 2014. HE Zhi Chief Between July 2010 and August 2012, he co-founded Shuyun Technology Innovation 37 (何直) Co., Ltd. (杭州数云科技有限公司). Mr. He received his master’s degree in electronic Officer communication and engineering in January 2009 and his bachelor’s degree in material science and engineering in July 2004, both awarded by Tsinghua University. Mr. Xu has served as the SVP since Oct 2015. Before joining the Group, he worked in the mobile business division of Alibaba where he held the positions of senior architect at UCWeb between June 2015 and October 2015 and general manager of the search product technology center of amap.com between May 2013 and June XU Jiming SVP (life 36 2015. Between July 2008 and May 2013, he worked at Baidu Internet Technology (徐济铭) sciences) Co., Ltd. as a technology manager. Mr. Xu received his master’s degree in computer application technology from the Graduate School of the Chinese Academy of Sciences in July 2008 and his bachelor’s degree in automation from Tsinghua University in July 2005. Source: Bloomberg, CMBIS

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Shareholding structure Figure 60: Shareholding structure No. of offer Share- Shareholders shares (mn) holding % Background Gong Yingying 416.2 44.99% Chairlady Sunshine Longevity Limited 96.1 10.38% Sunshine Insurance Astonish Investment Pte. Ltd 60.1 6.49% GIC Medding International 55.6 6.00% BVCF fund Other pre-IPO investors 117.4 12.69% Including CIC, Tencent, Guiyang government Others public float 118.0 12.76%

Cornerstone investors OrbiMed Funds 11.8 1.27% Canada Pension Plan Investment Board 11.8 1.27% Yaqut Sdn Bhd 11.8 1.27% General Reserve Fund of the Government of Brunei Tencent Mobility 5.9 0.64% Velmar Company Limited 5.9 0.64% Kerry Holdings Limited Matthews Funds 5.9 0.64% 3W Fund 5.9 0.64% China Orient 2.9 0.32% 61.9 100.00% Source: Bloomberg, CMBIS

Investment risks Regulations: If the regulation on collection, use and sharing of personal information is being changed and Yidu Tech fails to adjust business strategies and launch new products, demand for its products could be significantly reduced.

Product design: Yidu Tech solutions rely on its proprietary AI and big data technologies. As the technologies are relatively new, they may contain design or performance defects that are not detectable even after extensive internal testing.

Cooperation with hospitals: Yidu Tech leverage real-world healthcare data to provider life sciences solutions. If Yidu Tech fails to secure requisite authorization from hospitals to use the data underlying Yidu Tech’s solutions if the research community or the principal investigators are unwilling to cooperate with Yidu Tech on clinical trials, delay in delivery of life science solutions could lead to revenue loss.

Customer concentration: Top five customers accounted for 48% of FY20 revenue of which one customer contributed over 10%.

Inventory risk: Yidu Tech inventory mainly consist of medical devices to be sold on health management platform. Any increase in inventory may affect working capital.

Insurance: Yidu Tech does not have any business liability or disruption insurance to cover its operations. In particular, Yidu Tech does not maintain product liability insurances, key- man insurances or typical CRO insurances such as professional liability insurance or commercial general liability insurance.

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Financial Summary

Income statement Cash flow summary YE 31 Dec (RMB mn) FY20A FY21A FY22E FY23E FY24E YE 31 Dec (RMB mn) FY20A FY21A FY22E FY23E FY24E Revenue 558 867 1,303 1,938 2,772 Net Income (1,511) (3,693) (588) (788) (1,008) Cost of sales (412) (540) (859) (1,340) (1,991) Depreciation & Amortization 37 26 31 39 47 Gross Profit 147 327 444 598 780 Net Change In WC (88) (127) 96 120 271 Others 1,202 3,244 (0) (0) (0) S&M (171) (239) (323) (433) (557) Net cash fr. operating act. (361) (550) (461) (630) (690) G&A (302) (310) (419) (561) (722) R&D (264) (222) (300) (402) (517) Capital Expenditures (32) (17) (26) (39) (28) Operating Profit/(Loss) (590) (443) (598) (798) (1,016) Others 174 3,861 386 695 834 Net cash fr. investing act. 142 3,843 360 656 806 Interest income 5 1 1 0 0 Interest expense (4) (3) - - - Equity raised 0 3,415 0 0 0 Other non-ops (922) (3,247) 9 9 7 Change of debts 603 (4,492) 0 0 0 Profit Before Tax (1,511) (3,693) (588) (788) (1,008) Dividend paid 0 0 0 0 0 Income tax (1) (1) (0) (0) (0) Net cash fr. financing act. 603 (1,076) 0 0 0

Profit After Tax (1,511) (3,695) (589) (789) (1,009) Net change in cash 385 2,217 (101) 27 116 Non Controlling Interest (2) 5 1 1 1 Cash at the beg. of the year 306 720 740 639 666 Net profit (1,510) (3,700) (589) (790) (1,010) Exchange difference 29 0 0 0 0 Cash at the end of the year 720 740 639 666 781

Balance sheet Key ratios YE 31 Dec (RMB mn) FY20A FY21A FY22E FY23E FY24E YE 31 Dec FY20A FY21A FY22E FY23E FY24E Non-current assets 144 100 94 94 75 Sales mix (%) PPE, net 33 28 23 24 5 Big data platform 67% 46% 36% 28% 21% Intangible assets 39 39 39 38 37 Life sciences solutions 18% 21% 29% 36% 40% Others 72 32 32 32 32 Health mgmt platform 10% 29% 32% 35% 38% Others 5% 3% 2% 2% 1% Current assets 1,160 5,150 4,772 4,357 3,912 Cash 720 740 639 666 781 Growth (YoY) Accounts receivable 287 366 444 681 940 Revenue 447% 55% 50% 49% 43% Others 153 4,045 3,690 3,011 2,191 Gross profit 2465% 123% 36% 35% 30% Operating profit n.a. n.a. n.a. n.a. n.a. Current liabilities 3,406 415 620 993 1,538 Net profit n.a. n.a. n.a. n.a. n.a. Convert. preferred shares 2,952 - - - - Accounts payable 187 177 302 491 760 Margins Accrued expenses 123 184 265 449 724 Gross margin 26% 38% 34% 31% 28% Others 144 54 54 54 54 Operating margin -106% -51% -46% -41% -37% Net margin -271% -427% -45% -41% -36% Non-current liabilities 1,623 83 83 83 83 Convert. preferred shares 1,053 - - - - Balance sheet ratio Convertible notes 486 - - - - Net debt / equity ratio (%) -101% net cash net cash net cash net cash Others 84 83 83 83 83 Current ratio 34% 1242% 770% 439% 254%

Share capital 0.0 0.1 0.1 0.1 0.1 Returns (%) Other reserves 26 12,205 12,205 12,205 12,205 ROE n.a. n.a. n.a. n.a. n.a. Retained earnings -3,751 -7,476 -8,065 -8,855 -9,865 ROIC n.a. n.a. n.a. n.a. n.a. Others -1 23 23 25 26 Total equity -3,726 4,752 4,164 3,375 2,367 Per share EPS (RMB) (2.15) (4.00) (0.64) (0.85) (1.09) Diluted EPS (RMB) (2.15) (3.45) (0.55) (0.74) (0.94) BVPS (RMB) (9.2) 9.3 4.5 3.6 2.6

Source: Company data, CMBIS estimates

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Disclosures & Disclaimers Analyst Certification The research analyst who is primary responsible for the content of this research report, in whole or in part, certifies that with respect to the securities or issuer that the analyst covered in this report: (1) all of the views expressed accurately reflect his or her personal views about the subject securities or issuer; and (2) no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific views expressed by that analyst in this report. Besides, the analyst confirms that neither the analyst nor his/her associates (as defined in the code of conduct issued by The Hong Kong Securities and Futures Commission) (1) have dealt in or traded in the stock(s) covered in this research report within 30 calendar days prior to the date of issue of this report; (2) will deal in or trade in the stock(s) covered in this research report 3 business days after the date of issue of this report; (3) serve as an officer of any of the Hong Kong listed companies covered in this report; and (4) have any financial interests in the Hong Kong listed companies covered in this report.

CMBIS or its affiliate(s) have investment banking relationship with the issuers covered in this report in preceding 12 months.

CMBIS Ratings BUY : Stock with potential return of over 15% over next 12 months HOLD : Stock with potential return of +15% to -10% over next 12 months SELL : Stock with potential loss of over 10% over next 12 months NOT RATED : Stock is not rated by CMBIS

OUTPERFORM : Industry expected to outperform the relevant broad market benchmark over next 12 months MARKET-PERFORM : Industry expected to perform in-line with the relevant broad market benchmark over next 12 months UNDERPERFORM : Industry expected to underperform the relevant broad market benchmark over next 12 months

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