The 2025 annual financial report from PA GOODDOCTOR (01833) contains several noteworthy details. The Hong Kong-listed leader in internet healthcare highlighted the following points in its report: annual total revenue reached RMB 5.468 billion, a year-on-year increase of 13.7%; gross profit was RMB 1.772 billion, up 16.3% year-on-year; the gross profit margin reached 32.4%, an improvement of 0.7 percentage points compared to the previous year; and net profit attributable to owners of the parent company surged by 366.1%, with operating profit turning positive for the first time.
According to statistics, the 32.41% gross profit margin represents a new high for PA GOODDOCTOR since 2018, when the figure was 27.32%. Furthermore, since 2023, the company's gross profit margin has consistently remained above 30%. While the gross profit margin is not the sole criterion for investment decisions, it serves as a key for initiating analysis. Comparative analysis of the gross margin is often the first step in income statement analysis, preceding examination of the three major expenses and asset impairments.
For the internet healthcare industry, the level of the gross margin not only reflects a company's cost control capabilities but also indicates the sustainability of its business model and its core competitiveness. A high gross margin signifies that the company has moved beyond a "burning cash for scale" growth model and possesses the ability to achieve a profitable business cycle through its own operations. This is a core metric for evaluating a company's transition from a growth stock to a value stock.
PA GOODDOCTOR's 32.4% gross margin in 2025 not only significantly outperforms most of its peers in the internet healthcare sector but also demonstrates a healthy trend where the growth rate of gross profit (16.3%) continues to outpace the growth rate of revenue (13.7%), indicating a pattern of simultaneous volume and price growth alongside improvements in both quality and efficiency.
From a financial perspective, every 1 percentage point increase in the gross margin corresponds to an incremental gross profit of over RMB 54 million, which directly translates into substantial growth in net profit. In 2025, the company's net profit margin rose from 1.7% to 6.9%, with an adjusted net profit margin reaching 7.6%. The steady improvement in the gross margin is the core driver behind this significant leap in profitability, highlighting the continuous optimization of the company's profit quality and a marked enhancement in operational efficiency.
More importantly, this improvement in the gross margin is not the result of short-term cost-cutting measures. Instead, it is driven by a combination of three factors: business structure upgrades, technology-driven cost reductions and efficiency gains, and the realization of economies of scale. This combination suggests the improvement is highly sustainable. Against a backdrop of increasing industry fragmentation where profitability has become a key competitive differentiator, PA GOODDOCTOR's gross margin advantage is evolving into a core barrier that helps it navigate industry fluctuations and consolidate its leading position.
As evidence, in 2025, PA GOODDOCTOR's corporate health management business performed exceptionally well, becoming the primary engine driving the gross margin improvement. Full-year revenue from the corporate health management business reached RMB 1.306 billion, a substantial increase of 40.6% year-on-year. This growth rate far exceeded the overall revenue growth, and the business's contribution to total revenue increased to 23.9%, establishing it as the company's primary growth driver. This business focuses on employee health management for corporate clients, providing integrated services such as health check-ups, chronic disease management, and workplace medical services. It is characterized by high average revenue per user, stable renewal rates, and a gross margin significantly higher than traditional consumer-facing services. Its rapid growth continues to elevate the company's overall profitability, serving as the core impetus for the gross margin improvement. By the end of 2025, the company served over 6,700 paying corporate clients, an 83.1% increase from 2024. The Gross Merchandise Value of the corporate health management business was approximately RMB 3.63 billion, with market penetration and customer stickiness continuing to rise.
Simultaneously, the core commercial insurance synergy business maintained steady growth, acting as a stabilizing anchor for gross profit. Revenue from the commercial insurance synergy business in 2025 was RMB 3.296 billion, an 11.0% year-on-year increase. Leveraging the ecosystem resources of Ping An Group, this business achieves deep integration between insurance and medical services. It benefits from high customer stickiness and low customer acquisition costs, and has established a differentiated profit model through its product system encompassing "commercial insurance + health protection mandates + medical and health services."
The combination of one rapidly growing and one steadily growing core business is driving the continuous optimization of the company's revenue structure, reducing reliance on any single business line. The logic behind the gross margin improvement has shifted from "passive cost control" to "active business upgrading," representing a qualitative leap in the quality of growth. Compared to many peers in the industry that still rely heavily on low-margin businesses like pharmaceutical e-commerce, PA GOODDOCTOR's business structure is more advantageous. The rapid expansion of high-margin businesses not only opens up further upside for the gross margin but also enhances the stability and sustainability of the company's profits, laying a solid foundation for long-term value growth.
In the internet healthcare industry, technological innovation is a core driver for reducing costs and improving efficiency, and is key to building a moat around gross margins. PA GOODDOCTOR has comprehensively applied artificial intelligence technology across its entire business process. By using technology to compress costs and enhance efficiency, the company has fortified the foundation for sustained gross margin improvement, creating a differentiated competitive advantage that is difficult to replicate.
In 2025, the "Ping An Medical AI" large model was deeply embedded in core processes such as medical consultations, follow-ups, patient triage, and health record management. The effects were immediate: the AI doctor's precise diagnosis coverage exceeded 11,300 diseases, with an assisted diagnosis accuracy rate of 95.1%; AI's contribution to gross profit reached approximately 4.5%; and in the fourth quarter of 2025, AI helped reduce the cost per consultation by about 45% year-on-year. This signifies that medical services, traditionally highly reliant on human effort and difficult to scale, have for the first time gained the potential for industrial-scale replication. One AI family doctor can simultaneously serve thousands of users for daily health monitoring, escalating cases to human doctors at high-risk points. This division of labor, where "AI handles breadth and humans handle depth," not only significantly reduces marginal costs but also improves service continuity and accessibility. This technology-centric model for cost reduction and efficiency enhancement, different from traditional cost-cutting methods, is sustainable and replicable. It consolidates the company's gross margin advantage and builds a deep industry barrier, allowing the company to maintain an active position in industry competition.
From a value investing perspective, sustained improvement in gross margin often serves as a leading indicator for stock price performance. PA GOODDOCTOR is currently in a golden investment period characterized by steadily rising gross margins, accelerating profit realization, and a recovery from low valuations. Its investment value combines both certainty and growth potential.
First, profit certainty continues to strengthen. The first-time positive operating profit in 2025 means PA GOODDOCTOR has completely moved past the phase of "burning cash for scale" and entered a stage of sustained profit delivery. This long-term trend, based on business structure optimization and technology-driven efficiency, carries strong certainty, providing a solid foundation for investment returns.
Second, the company possesses deep industry barriers and significant competitive advantages. As the core flagship within Ping An Group's medical and elderly care ecosystem, the company leverages the group's resources of 250 million individual financial customers to build a closed-loop service ecosystem integrating "insurance + medical/health/elderly care." This enables the interconnection of medical and insurance data and service synergies, an ecological advantage difficult for peers to replicate. Concurrently, the company has iteratively upgraded its "online, in-hospital, at-home, and corporate" service network, collaborating with over 5,100 hospitals, more than 240,000 pharmacies, and over 4,400 health check-up providers. The continuous expansion in service coverage breadth and depth further consolidates its leading position and supports the sustainability of its high gross margin.
Third, the valuation upside is substantial. As of March 25, 2026, PA GOODDOCTOR's market capitalization was approximately HKD 27.558 billion, with a price-to-earnings ratio of 64.07 and a price-to-book ratio of 2.51. As gross margins continue to improve and profits grow at a high rate, the company's valuation metrics are expected to gradually converge with those of industry leaders. The combination of valuation expansion and profit growth could create a "double play," suggesting significant potential for stock price appreciation.
Fourth, the long-term growth logic is clear. Current trends, including an accelerating aging population, exploding demand for corporate health management, and the expansion of the commercial insurance market, are unleashing substantial growth tailwinds for the internet healthcare industry. Leveraging the high growth of its business-to-business segment, increasing customer stickiness in its consumer segment, and ongoing technological empowerment, PA GOODDOCTOR is positioned to potentially maintain double-digit growth in revenue, gross profit, and net profit over the next 3-5 years, indicating immense long-term growth potential.
Following the earnings release, several brokerages, including Citi and Bank of America, issued research reports expressing optimism about the company's performance growth in 2026. Citi set a target price of HKD 18 and recommended investors "Buy" the stock.
Assessing PA GOODDOCTOR today, the core investment thesis has become clear: the market should no longer view it as a "concept stock" requiring constant validation of its profit potential. Instead, it should be recognized as a "growth value stock" that has entered a profit realization cycle. The record-high gross margin, leading to a significant jump in the net profit margin, provides the most solid financial basis for this assessment. The company's strong profit-generating ability will supply ample "ammunition" for its ventures into new frontiers such as AI medical research and development, elderly care industry布局, and online-to-offline integration, supporting its ability to weather economic cycles and achieve sustained growth.