Earnings Transcript for 6618.HK - Q4 Fiscal Year 2023

Operator: Good day, ladies and gentlemen. Thank you for standing by. Welcome to the JD Health International Incorporation 2023 Annual Results Conference Call. [Operator Instructions] I will now turn the call over to Ms. [indiscernible] Head of Investor Relations team at JD Health. Please go ahead Dubi Ling.

Unidentified Company Representative: Thank you, operator. Hello, everyone. Welcome you to our '23 Annual Results Conference Call. Joining us today are JD Health's Executive Director and CEO, Mr. Jin Enlin; the CFO, Mr. Deng Hui. Before we start, we'd like to remind you that today's discussion may contain forward-looking statements, which involve a number of risks and uncertainties. Actual results and outcomes may differ materially from those mentioned in today's announcement and in this discussion. The company does not undertake any obligation to update this forward-looking information except as required by law. During today's call, management will discuss certain non-IFRS financial measures for comparison purposes only. For a definition of non-IFRS financial measures and reconciliation of IFRS to non-IFRS financial results, please refer to the annual results announcement for the year ended December 31, 2023, issued yesterday. For today's call, management will read the prepared remarks in Chinese, and we'll only be accepting questions in Chinese during the question-and-answer session. A third-party interpreter will provide simultaneous interpretation in English unless separate lives for the duration of the call. Please note that English translation is for convenience purposes only. In case of any discrepancy, management statements in the original language will prevail. I would like to turn the call over to Ms. Jin Enlin. Please go ahead, sir.

Enlin Jin: Hello, everyone. I'm Jin Enlin, CEO of JD Health. It's a pleasure to share with you today 2023 annual results. As an industry leading healthcare service provider, JD Health continued to cultivate the integrated online and offline healthcare service system in line with national policies and regulatory guidelines while proactively fulfilling our social responsibilities. In 2023 as we consistently strengthened our value propositions as a first entry point for online health consumption, we achieved a high-quality development with our focus on comprehensively safeguarding user health, thereby creating sustained value for both shareholders society as a whole. Now I'd like to share our business updates for 2023, followed by a discussion of our business outlook for 2024. Let me first walk you through what we achieved in 2023 across three primary areas. There are three primary areas to start with. The first session of bolstering infrastructure and solidifying our position as the first entry point for online health consumption. In 2023, we continued to develop our pharmaceutical and healthcare supply chain infrastructure and leverage our high-quality service capacities to make quality assured pharmaceutical and health products and services presentable and affordable for a broader population. We consistently attracted the new merchants to our platform and optimized our warehousing distribution networks. Notably, we continued to build out our national warehousing network and cold chain fulfillment service coverage. As such, with over 24 pharmaceutical warehouses and over 100 medical device and health product warehouses across the nation, our same day delivery has covered 220-part cities and our next-day delivery has covered 386 cities. Moreover the number of products applicable to the two or more programs increased by 10.2% year-over-year. We also launched a series of user centric service assurance, including the elderly, inclusive customer service refund for the late packages and lightning faster refunds for the more, our CNY 10 billion discount program and the CNY 9.9 items with free shipping activities encompassed more than 40,000 products. These promotional activities, along with our 30-day price governing policy for direct sales and free shipping on orders from third-party merchants benefited our customers with increased availabilities, as well as continuing to use this evolving personalized healthcare needs, we joined hands with extensive healthcare brands and business partners to enrich our platforms further offerings. For instance, we teamed up with full-time licensed doctors and other health professionals practicing our platform to offer accurate and professional nutrition health advice. In this way, we helped users browse and choose the most suitable nutritional products to meet different cohorts needs, including elderly children and pregnant and postoperative women. JD Health has emerged as partner of choice for global pharmaceutical healthcare brands, seeking to explore growth opportunities through only channel expansion. We comprehensively upgraded our faster delivery service options. By establishing self-operated online pharmacies and expanding our partner pharmacy network, we reached a broader user base with our on-demand retail services. For instance, we opened several self-operated pharmacies in Beijing and enabled medical insurance premiums for online purchases in Shanghai, creating a convenient and efficient pharmacy purchase experience to customers. Second, building integrated online and offline service system to improve medical and health service accessibilities. In last year JD Health actively expanded the broad interests of medical and health services through service innovation. For instance, we launched the JD Health Online Medical Care Center, specializing in dermatology, elderly care services under our JD Family Doctor product and at-home testing services, among other things. This new option is not only provided the users with more comprehensive services, but also strengthened integrated online, offline service systems. Online medical care center specializing in dermatology has served a model of million patients since inception in April 2023. Also since the flu season began in winter 2023 our at-home testing service covering 12 common respiratory viruses and pathogen infections has served over 150 million people across 10 cities nationwide. We also upgraded JD Family Doctor to bring proactive health management services and one-stop medical solutions to different user demographics. Those advancements and our superior specialty service offerings have made JD Health one of the industry's most comprehensive online health platforms. Furthermore, our JD Health Polyclinic Center and Suyu Community Hospital, a medical institution we joined to build with Suqian government officially commenced operations in 2023, making JD Health the only leading Internet healthcare enterprise to provide both online, offline retail pharmacies and medical services. Innovating public health with their models to drive inclusivity in health through technology JD Health is and will remain committed to empowering health industry digital transformation and driving inclusivity in health with our sophisticated technology capacities. In 2023, we introduced the Jingyi Qianxun large language model for medical and health applications. This is the industry's first large language model that seamlessly integrates data from physical products and digital services. Merging knowledge with data supported by this large language model, the dermatologist specialized online medical care center we just mentioned, has achieved an AI diagnosed average rate of more than 95%. We also introduced our Smart Doctor system for the doctors practicing in our platform currently. Jingyi Qianxun model is serving as our foundation technology to advance and deploy AI cloud product solution upgrades, improving cost efficiency and utilizing user experience across the industry. In 2023, JD Health steadfastly improved and innovated public health with a model hosted and participated in a broad series of public welfare activities, including care assistance for rare disease patients, rural women's healthcare activities, Beijing-Tianjin-Hebei flood relief and medical support for Tibet clinics. Through those endeavors, we firmly uphold our commitment to social responsibilities. Next, an overview of our strategic priorities for 2024. First, we will continue solidifying our leading position in the health consumption sectors. To this end, we will remain our focus on improving product offerings, optimizing user experience and expanding service scenarios. In partnership with global brands and merchants, we will accelerate our stride towards the first entry point for health consumption across full spectrum of user cases and omni channels in regard to supply enhancement. We aim to nurture and cultivate more high-value merchants and follow up the product, each of which generates tens of thousands of GMV and even millions of GMV. To further enhance user experience, we will provide faster, better and more affordable products and services, unify and improve the user experience across direct operated and third-party stores to cultivate a unified user perception of shopping at JD Health. Finally, for scenario expansion we will further deepen the supply chain capacities for our on-demand retail business and comprehensively upgrade in store and at home service experience. Second, in health service aspect, we remain committed to delivering professional, convenient and reliable health services to every users. Building on ongoing innovations in online specialty services we will further expand our medical service offerings to traditional doctor scenarios and increase medical resources. Meanwhile, we will implement compliance, quality control and standardization across the board to make online medical specialty more professional, compliant and safer. Last but not least, we will maximize the value of technology. As an innovative healthcare service provider JD Health has long upheld applying AI and other emerging technologies in the healthcare sector bringing great value. In 2024 we will promote China's AI plant initiative, continue developing our industry-leading Jingyi Qianxun healthcare large language model and accelerating the application of the AI Plus medical and healthcare scenarios to improve healthcare quality, efficiency and experience. In addition, as we have mentioned in the last -- in the conference a couple of days ago, we will ensure the quality, the efficiency and the diversity of the product to upgrade our brand. With respect to the public welfare, we will concentrate on the three primary aspects, elderly care, children's care and care for the rare disease patients. Leveraging popular science, education, public welfare activities, online services and digital screening, we will bring healthcare services to a wide range of people, including these vulnerable cohorts. Looking ahead to 2024, we believe that the Health China 2023 initiative and the evolving health consumption trends will drive ongoing rapid growth in the online healthcare industry. JD Health will build on its distinct competitive position to continue to increase its business fundamental strength while strategically developing new categories and innovative models to cultivate joint forces for long-term healthy business development. In conclusion, we will remain dedicated to promoting the industry's high-quality development benefiting the people and delivering value to shareholders, stakeholders and society as a whole. Thank you. I'll now turn the call over to our CFO, Ms. Deng Hui to provide details on financial performance.

Deng Hui: Thank you, Ms. Enlin. Thank you for joining the JD Health earnings conference call. I'm pleased to provide an update on our performance in 2023. Driven by a confluence of supportive policies, heightening market demand and technological innovation of Internet health service offerings penetrated a broad array of the scenarios in 2023. As such, we delivered great value to consumers through our online pharmacy, medical consultations and health management services. The leading player in this new era of health services, JD Health leverages technology to service model innovation and enhance our integrated online and offline line service system. We are committed to providing quality, accessible and affordable healthcare services to a broad range of users. Against this backdrop, JD Health maintained high-quality growth with revenue of RMB 53.5 billion in 2023, up 14.5% year-over-year. Through the year, we optimized our retail business model, encompassing direct sales online marketplace and on-demand retail, opening up our platform to achieve shared growth with upstream and downstream partners. Meanwhile, our commitment to compliant operations and comprehensive quality management brought better, safer products and services to our users. We also continued to strengthen our supply chain capacities, expanding our product offering while maintaining price competitiveness. These initiatives greatly enhance users' trust in our brand. As of December 31, 2023, our annual active user accounts for the past 12 months reached 172 million, a significant increase of approximately 80 million compared to 2022. Our share of JD Group's annual active users also continued to increase. Additionally, we leveraged the precise digital marketing to explore user demand and more effectively promote products matching that demand, increasing shopping frequency. As a result our annual active users shopping frequency and the GMV continued to grow year-over-year. Our enhanced brand awareness, enriched product and service portfolio and optimized user experience clearly contributed to boosting our user market share across online medical products and healthcare services. In 2023, we consistently expanded cooperation with industry-leading pharmaceutical companies and healthcare product suppliers, while building out our national warehousing network and cold chain fulfillment service coverage. These efforts strengthened our industry-leading fulfillment capacities for pharmaceutical and health products. Our direct sales revenue in 2023 grew by 13.1% year-over-year, reaching RMB 45.65 billion and accounting for 85.3% of the total revenue. Propelled by our broad active user base, enhanced operation system and a healthier marketplace ecosystem, the number of third-party merchants on JD Health surged by over 100% year-over-year to over 50,000 as of December 31, 2023. Furthermore, we provided more traffic support for the third-party merchants to boost their growth by optimizing the traffic distribution mechanism and provided additional marketing opportunities across shopping channels. We increased the exposure of high-quality merchants and products driven by rapid growth in commission fees and advertising revenues. Our service revenue reached RMB 7.88 billion, marking a 23.7% year-over-year increase. Service revenue accounted for 14.7% of total revenue, up by 110 percentage points compared to 2022. We've also made great progress developing our on-demand retail business in 2023. As of the end of December, we have opened nearly 13 self-operated community pharmacies in Beijing to offer users efficient and convenient on-demand purchase and delivery services of pharmacies featured 24-hour prescription pickup window and have staffed with dedicated delivery workers. Meanwhile, we further optimized our third party merchant policies and conducted multiple marketing campaigns during the Double Eleven promotional period, creating sales growth opportunities for partner pharmacies while benefiting customers with faster delivery and better prices. We also enabled medical insurance payments for online purchases in nearly 700 pharmacies in Shanghai, providing local consumers with a more convenient and efficient pharmacy shopping experience. With respect to healthcare services in 2023, we continued to enhance our specialty care service capacities and enrich the platform's online healthcare service offerings. We also accelerated our expansion of offline healthcare service scenarios to provide more consumers with integrated online and offline medical services locally. In 2023, we launched China's first online medical care center specializing dermatology. It has served millions of patients since its inception through our closed loop online service model, which we continually refine to ensure the high-quality service. Additionally, our JD Health psychological service center focused on users daily consulting needs and providing personalized psychological support by the end of 2023, the psychiatrists and counselors practicing in our platform has served hundreds of thousands of users. We also comprehensively upgraded our JD Family Doctor product featuring proactive health management services, including year round online care and personalized nutrition plans. This enhancement is successfully addressed the general healthcare needs of our users of our state of all ages. In 2023, JD Health Polyclinic Center officially commenced the operations in Yizhuang, Beijing and Suqian offering users in the cities a multifaceted, comprehensive range of premium health management services. Furthermore to deepen our exploration of online and offline medical service integration and innovation, we jointly established the Suqian Community Hospital in cooperation with Suqian government authorities. We found that our healthcare service users total GMV and shopping frequency on our platform far surpassed the average, indicating that high-quality healthcare services can boost the user stickiness and become the key growth driver for JD Health ecosystem. In addition, we are convinced that as long as our products and services continue to create value for the industry and our users, our business models will generate revenues for the shareholders in the long run. Due to the changes in our business model, composition and product mix, our gross profit margin in 2023 increased 100 basis points year-over-year to 22.2%. Excluding the impact of the high proportion of pandemic-related categories, non-pandemic categories still maintained a much higher growth rate than the industry in 2023. Also, our direct sales business gross profit increased overall, reflecting our ongoing efforts to bring users a more cost-effective product experience through the supply chain refinement. In the future, we will collaborate with some more merchants on the platform to offer users higher-quality services at the more competitive prices, enabling them to enjoy a better experience while saving more. This will also help continually nurture users' awareness of our brands, further expanding of our market share in various categories. On a non-average basis, our fulfillment expense ratio in '23 was 9.6%, a slight increase of 20 basis points from 2022, owing primarily to our broad promotion of a simplified shopping with direct discount and the reduction of the free shipping threshold. This year, we proactively implemented a low-price strategy initiated by JD Group and applied the single item at hand price rule to all JD Health products. That is, users can directly view the discounted price of each item after searching for it, allowing them to better enjoy the everyday low price shopping experience without having to perform any calculations themselves. This adjustment of the free shipping threshold also reflects the everyday low price experience. In 2023, we made significant strides with our JD Pharmacy brand promotional strategy, leveraging influencers and targeted event marketing to widen our reach. This effort successfully strengthened our brand's recognition and influence among consumers. We also finetuned our approach to management traffic, which led to a minor increase in our selling and market experience ratio in 2023 from 0.3% to 4.9%. We will continue to promote our brand and core products to enhance our reach and boost the conversion of the new users. This year, we are emphasizing scenario-based marketing, focusing on four major scenarios, including at home medicine, healthcare support, sports health product, emergency medicine and investing in more diverse marketing channels. In 2023, our R&D expense ratio was 2.1%, flat with 2022. As of the end of December, we employed a total of 556 R&D personnel. In 2023 JD Health launched the Jingyi Qianxun, a pioneer long language model tailored for the healthcare sector. This model incorporates extensive range of clinical guidelines, medical research, review articles and experts insights. Notably, Jingyi Qianxun is the first [indiscernible] both physical products and the digital services. In July of 2023, JD Health deployed skin imaging processing and sleep monitoring tools received Class II medical device designations, making a major milestone in the medical use of the digital therapy products. Looking forward, we will continue to push the envelope in the healthcare specific large language model applications to drive improvements in the quality and efficiency of our online consultation services. Our G&A expense ratio was 0.8% in 2023. Our back-end staff and operational management efficiency levels continue to lead the industry. Impacted by the high interest rate of the offshore deposits during the Federal Reserve's interest rate hikes, financial income increased to RMB 1.95 billion in 2023 from RMB 854 million, up 125.5% year-over-year. Loan average and other net income and gains in 2023 were approximately RMB 420 million, primarily consisting of the returns from wealth management products and government grants. To reward our core management team member, we incurred RMB 1.85 billion of share incentive expenses in 2023 including the share incentive for average net profit in 2023 increased by 58.2% year-over-year to RMB 4.14 billion and non-average net profit margin was 7.7%, rising 210 basis points year-over-year. Our cash flow from operating activities reached RMB 4.60 billion in 2023. As of the end of December, the combined amount of cash and cash equivalents restricted the cash, long-term and short-term deposits and wealth management products at the fair value through profit, loss and at amortized cost was RMB 53.1 billion. Overall, JD Health maintained high quality growth across its entire business in 2023. And our platform ecosystem continued to strive and grow. Our full year on-average net profit significantly fitted the market expectations. This, along with robust cash flows and an active high-quality user base reflects advantage of our dual engine, closed-loop business model. Our strong financial performance is rooted in our core business philosophy of the trust-based value creation centered on our customers' health. We firmly believe that value creation is the engine that drives enterprise long-term sustainable development. Looking ahead, we remain committed to opening and funding of supply chain infrastructure and healthcare service capacities fostering close cooperation with both upstream and downstream partners. This will empower us to nurture seamlessly integrated healthcare system that bridges online and offline services. Our goal is to grow alongside our customers, industries, the partners and find it at large while contributing positively to the environment. As a pioneer in the healthcare service sector, we will continue to strengthen our pharmaceutical and healthcare supply chains as well as the service capacities to make healthcare products and services more feasible, convenient and affordable for everyone. That concludes our prepared remarks. Now we're open for questions.

Unidentified Company Representative: Thank you, Ms. Deng Hui. This concludes our prepared remarks. We would like now to open the call to your questions.

Operator: [Operator Instructions] The first question, we are going to welcome Miranda from the BofA to give us a question.

Unidentified Analyst: I'm so happy to understand your performance in 2023. So my question is as follows. In the last years, the impact of the COVID-19 is subsidizing. And I want to check with you if there is any adjustment of the corporate strategies. And what is the goal of the 2024? What is the starting point and plans?

EnlinJin: Thank you, Miranda for the question. I want to take up this question and give you certain insights. From my personal view, the business sector, especially the medical business is something for long. I want to quote what I said in the last week's partner conference. The medical care and healthcare sector and the business is not going to be completed overnight. We have to be -- go with every step, we have to strengthen our efforts day by day. That is the business, that is the principle. Our strength is our determination, our commitment and our consistency. And we want to be the first Chief Medical Officer for the people and for the nation. And we want to spend the scale, the capacities as well as the resources. That is something we will never give up. Over the last year, we are transitioning our principal from more and cheaper to more, better, faster and cost effectiveness. As we are getting more -- as we are managing our supply chain and capacities in a better way, we are winning the trust from our partners, and we are getting closer with our collaborators. Over the last couple of years, we have already proven our value to the market on a sustainable manner. Our strategy has been verified by the market as well as the partners. In 2024, this is our first complete year off the COVID-19. As I can presume, the impact has been subsidizing and the business and performances could be well managed under our charge. We could do it in a better way, and we could go deeper and we could be more detail oriented. Here comes the two directions I'm going to share with you right now. First of all, we are going to continue with our main business. As I've already mentioned in my prepared remarks, I want to give you a summary. Along demand business, we have to boost up the demand as to grow the business. In 2024, we will maintain the growth momentum of the merchants by including more resources and new and innovative products. Also, we will also provide more resources to the merchants, helping them to grow and helping them to gain traffic. Secondly, we will continue to boost up the user experiences. Shortly, we could summarize it into better and faster. The POP products and services will be in line with our self-operated products and shops. We will build up better flagship merchants to help the ecosystem to grow and prosper. We believe that difference makes the journey easier. Thirdly, we have to innovate on different scenarios and business models. We will strengthen and consolidating our practices on the retail business, we will optimize the front end experiences, systematic products as well as relevant capacities. Generally speaking, we want to do it more faster, efficient and cost-effective or cheaper. The omnichannel capacities will be expanded and prioritized for the users and for the merchants, as well as different brands. That is something very good for them. Those are something we will do for the current business and main business. Followed by that I want to say a few words about the innovative business. We know that the innovation is something we have to grasp. We are an innovative healthcare and product supplier. What we are good at is excelling at creating great innovative products and services. That is also something we are good at for the last few years. We are also collecting new demands. During that process, we keep innovating. We will keep doing new things, keep making the breakthroughs. Innovation is something we are looking into the future. It is a long journey. The online medical and online consultation is something we are good at. In 2023, we did lots of good achievements, such as the new business, new technologies and new services. And in 2024, we will never stop. That is something we will continue for sure. Among all the creativities and innovative products and services, we want to be the faster one, the better one, and we have to grasp the opportunities at a more efficient pace. And we were more focused on the application of the innovative technologies. As in this year's two sessions, the National Congress, the AI Plus initiative was proposed. That is something we are prioritizing our resources on. We want to practice it as well. Yes, the AI Plus initiative strategies will be implemented within our corporation.

Operator: Next question, we are going to welcome Lincoln Kong from Goldman Sachs.

Lincoln Kong: I want to ask a question about competition and the market landscape. For you, now you are facing an even increasingly fierce competition market. How you are going to maintain your core strength to ensure the industrial leading position?

EnlinJin: Thank you for the question. Over the last few years, we have achieved remarkable achievements. It can be attributed to our leading position in managing the retail business. On the other side, we have inherited a good team spirit from the group. That is something we are excelling at. We could think good, then do good. Looking to the future, in face of the competitors and the market landscape, we have to maximize and leverage our existing strengths and we will rely upon the strengths, the resources and capacities of our teams. Of course, innovation, diversified products and solidified product portfolio experiences are something we are going to work on. Generally speaking, we want to offer cheaper, better, more goods to the consumers in a faster manner. That is something we will never forget. JD Health is good at offering better and faster products and services to the consumers. In light of the management of supply chains, we have maximized the strength of the B2C e-commerce. That is why we could be the top choice of the partners. We are the first and sought-after partner in the global market. We are running the online and offline business in a smooth manner. We have a self-operated plus, POP, the B2C plus O2O all scenario omnichannel supply chain capacities. I also want to say if a few words about the medical services and medical care. This is not something that we can do overnight. We have spent the time, resources and efforts to complete the construction of online specialty clinics. We are now working with professional healthcare givers, pharmacists and nutritional therapists. When we are meeting the consumers, we are going to provide them professional services and products. And we are also seeing the management of the full life circled customers. That is something we are going to rely upon our top technologies. Last year, Jingyi Qianxun large language model was released, which has been applied in multiple scenarios. Among the forward-looking technologies, we might not invest hugely to lead the industry. We must find the tipping point to balance the commercialization and the input. We want to ensure the faster, better and maximum output. What we're good at is the combining the scenarios business capacities as well as the innovation of the new technologies. To wrap it up, JD Health relies upon the supply chain plus medical service to create a unique ecosystem to consolidate our online plus offline first entry point to ensure medical consumption. For customers, we are offering them better choices with lower price, with better services, with more professionalism, making us a more reliable brand for them to make easy decisions and enhancing their stickiness. That is why we could attract more merchants to come up with more brands, more products to create a good circle. I believe that this is how we could make it a benign ecosystem and we could diversify our strengths along with other partners and users.

Operator: The next question, we are going to welcome Henry Liu from UBS.

Henry Liu: I'm Henry Liu. I want to ask a question about the pharmacies. I know that currently they are seeing the pressure. They are competing against each other. So I want to ask your prediction on the pricing trend as well as the management of pharmacies.

EnlinJin: I want to take up this question. For the upper trend, I believe that we are still having a big room to improve in the short run. I don't think we are going to go lower than 2023 because we want to analyze three elements in the first place, the supply potential, the demand strength as well as the ability to match the 2. First of all, I'm going to start my explanation with the analysis on the potential. Medical healthcare business is expanding itself where we are dealing with the pharmaceuticals, medical devices, nutrient products, we are going to see something new. The new products coming out year after year, such as the GLP-1, AR, the NMN anti-aging reagents or the autonomous rehab medical devices, those new products are good for transaction. That's something for sure. JD Health continues to attract new merchants and to diversify our product portfolio as we are seeing some new drugs. JD is the first pharmacy online to sell the NML. The next element is about the demand towards health. That is something we see from the ancient time to the current stage. It is time resistant. Everybody should be the first person to be responsible for his or her welfare and health. Despite quite a few uncertainties on the market, health is still the core value we are striving for. Currently, we are giving more disposable income to maintain health. That is the general trend for China as well as for the industry. Statistically speaking, after retirement, an individual's disposable income for insuring health will be doubled. And we are seeing the trend of aging population that is going to create more revenue in this regard. The last element is about the ability to match the supply and demand. I believe that is something very easy for me to explain. Over the years, our [ARPA] performance has never been going negative. Even in the COVID-19 period, with quite a few inventory, the ARPA was still growing positively, which signified that the shopping frequencies helped us to set off the reduction on the ARPA. That is why we are confident to say that we could manage the users very successfully. We offer good products with perfect services or with cost-effective prices. Of course, we are having a big room to improve, such as different portfolio as well as cross boundary categories. Generally speaking, I believe that the ARPA could boost up even more and that is something we will focus our resources to help achieve that.

Operator: Now let's welcome Xipeng Feng from CICC.

Xipeng Feng: I have read quite a few reports in this season. There are kind of activities, initiatives to pay back the investors and stakeholders such as enhancement of the buyback or the division. So I wanted to check with you, do you have such plans? Or do you have any more programs on the cash utilization?

EnlinJin: Thank you for the questions. Yes, some of the investors are watching over on this issue. I want to check with you how are we going to move forward? And we are going to factor in three elements as well. The first is about the willingness, the second is about the ability, the third is about the timing. About willingness, I believe that everyone could see this matter very clearly. Our group has been making the positioning to ensure sustainable and stable division distribution. And I believe that as a subsidiary, we are good at paying to our investors. The next is about the ability. We are very confident in managing our profit and cash flow. Despite that a large proportion of the cash flow is from the IPO proceeds. According to the market rule, we're not going to use that. Over the last two years we maintained positive revenues and profits and cash flow is doing a very good job. But it still takes time for us to build up a structure to ensure stable dividend. Right now, we are not fully capable of doing that. The next element is about the timing. Right now, the market value of JD Health is severely underestimated. The market value is [HKD 100 billion] while our assets, including the cash deposits is approaching HKD 16 billion. If we are going to use the EV divided by ES, the formula, we could understand the discrepancy. So I want to find out a good timing to buy in. In the past experiences, we are seeing the good outcome, but it is quite limited. In the short term, it could stabilize the market sentiment as well as boost up the market confidence. It will also help the short term investors to ensure their pocket. But for the long term, when we are going deeper into the fundamentals, we want to be more stable. We want to build -- we want to take the long-term view. Generally speaking, we want to be a good investor as well, and we also want to be a good market accelerator. At the present, JD Health is a company with the general strengths, and we have already been doing a lot of market research to understand the market chances, opportunities. We are staying open and active. We are also taking different measures to boost our know-how to ensure our success rate. At the right time, at the proper direction, we will go and invest. I hope that my answer could help you to relieve the pressure. Thank you for staying with me. I wish that I have answered your question.

Operator: Thank you. I have no more questions. Due to time constraints, this concludes today's question-and-answer session. At this time, we'll turn the conference back to Jin Enlin for any additional or closing remarks.

Enlin Jin: Thank you once again for joining us today. If you have any further questions, please contact our IR team directly. Thank you.