Innovative drugs + AI: Is JD Health reshaping its growth narrative?

Beyond its traditional e-commerce business, JD Health is attempting to reshape its growth narrative with two new engines: innovative drugs and AI.

According to Zhui Feng Trading Desk, an HSBC research report dated October 13 indicates JD Health’s fundamentals are strongly supported by two core businesses: pharmaceuticals and health supplements. The report predicts that, under this dual driving force, the company’s revenue will achieve approximately 20% year-on-year growth in the second half of 2025.

Among them, the innovative drug business is regarded as a “highlight.” According to the report, innovative drugs now account for about 30% of JD Health’s total prescription drug sales, and its growth rate is expected to keep rising, mainly driven by the migration of online traffic resulting from prescriptions flowing out of hospitals. Meanwhile, the growth of the health supplement business is also expected to benefit from increased users and traffic.

AI Empowerment Shows Initial Results, Conversion Rate Improves by 10 Percentage Points

In this report, AI is no longer just a concept, but has turned into tangible operational benefits. JD Health revealed at the investor conference that the application of AI technology has helped the company improve cost efficiency and conversion rates by 10 percentage points.

The company is able to use its massive real user conversation data on the platform to train its AI models, making them more precise and efficient. Going forward, JD Health will continue to invest in AI, but the report views the scale as “manageable.”

Offline Expansion and Investment Drag on Short-term Profits

Growth does not come without a price. The report states that JD Health is actively expanding offline, planning to open 200 new self-operated pharmacies this year. This investment is the main reason for its pressured profit margins.

Data shows JD Health achieved an adjusted net profit margin of 10% in the first half of 2025, but the company expects this indicator to remain at 8-10% in the short term. The report forecasts non-IFRS net profit margin to be about 8% in the third quarter of 2025, and possibly drop to around 6% in the second half of 2025.

However, the report also mentions that the company is implementing “stricter cost controls,” which should help buffer profit margins.

Based on the above analysis, the bank ultimately maintained its “buy” rating for JD Health and raised its target price from HKD 65.00 to HKD 66.00, believing the company can well capture the increasing online medical demand under the backdrop of healthcare reforms. As of the report release date, this target price implies a 7.4% upside.

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The above highlights are from Zhui Feng Trading Desk.

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