JD Health's Q1 Earnings Significantly Exceed Expectations, Maintains Full-Year High Growth Guidance

Overview

Nomura Securities published a research report reviewing JD Health's (6618.HK) Q1 2026 performance. The report notes that while revenue met expectations, earnings significantly exceeded, driven by gross margin expansion from improved supply chain capabilities and growth in high-margin advertising revenue. Despite near-term pressure on nutritional supplements due to stricter regulations, management remains confident in achieving full-year high-teens to 20% revenue growth. Nomura maintains Buy rating and HK$80 target price.

Core views

Performance: Steady Revenue, Explosive Profit Growth JD Health's Q1 2026 total revenue grew 17% YoY to RMB19.5 billion, representing 22% of Nomura's full-year forecast. By segment, pharmaceutical products, nutritional supplements, and medical equipment sales grew 25%, 15%, and 5% YoY respectively, with pharmaceuticals being the strongest. Non-IFRS operating profit (OP) surged 48% YoY to RMB1.9 billion, with operating margin expanding 2.1pp to 9.9%. This improvement mainly came from gross margin expansion due to enhanced supply chain capabilities and rapid growth in high-margin advertising revenue. However, non-IFRS net profit growth lagged at just 6% YoY to RMB1.9 billion, primarily due to reduced non-operating income from fair value changes in certain financial products. Forward Guidance: Near-Term Pressure, Full-Year Target Unchanged In Q2 2026, the company observed accelerating pharmaceutical sales and gradual recovery in medical equipment, but nutritional supplements growth slowed. Management attributes this to stricter regulations, including tighter origin certification requirements for cross-border supplements and restrictions on excessive marketing, delaying new product launches. Nevertheless, management expects nutritional supplements to reaccelerate in H2 2026 after compliance work completes. The company reaffirmed full-year high-teens to 20% revenue growth guidance and committed to maintaining at least flat operating margins while increasing investment in AI and instant retail. Considering an expected RMB1 billion YoY reduction in financial income, management believes non-IFRS net profit for FY2026 will not be lower than 2025 levels. Capital Return: Large-Scale Buyback Initiated To enhance shareholder returns and prevent dilution from employee stock ownership plan (ESOP) issuances, the company announced a trust to purchase existing shares. Additionally, the board approved a share buyback program of up to US$1 billion over four years, demonstrating management's confidence in long-term value.

Analysis framework

Nomura employs a combination of segment tracking and margin driver analysis. First, by decomposing growth in pharmaceuticals, nutritional supplements, and medical equipment, it assesses business line momentum changes. Second, it analyzes sources of operating margin expansion, distinguishing between supply chain optimization (cost side) and high-margin business (e.g., advertising) mix improvement (revenue side). Finally, incorporating regulatory impacts on specific categories (e.g., cross-border supplements), it adjusts near-term revenue expectations while validating long-term growth logic resilience based on management's adherence to full-year guidance. Valuation uses an adjusted P/E model excluding net cash to reflect core operating profitability.

Methodology notes

• Valuation MethodPE/PEG valuation

  Adjusted P/E Valuation

  The report uses (market cap - net cash)/adjusted operating profit to calculate adjusted P/E as valuation anchor. This method removes cash and non-core impacts, better reflecting core business profitability and valuation.

• Industry Analysis FrameworkVolume-Price Breakdown

  Segment Volume-Price Analysis

  Breaking total revenue into pharmaceuticals, nutritional supplements, medical equipment etc. to track volume and price trends, precisely identifying growth drivers and obstacles (e.g., supplements impacted by regulations).

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• JD Health (6618.HK)

  Direct beneficiary, earnings beat and buyback positive

  Strengths

  Strong supply chain, fast-growing high-margin businesses like advertising, ample cash flow

  Weaknesses

  Nutritional supplements temporarily pressured by regulations

  Risks

  Online healthcare regulatory risks, intensifying competition, slower-than-expected healthcare service monetization

Key data

• 2026Q1 Total RevenueRMB19.5 billionUp 17% YoY, in line
• 2026Q1 Non-IFRS Operating ProfitRMB1.9 billionUp 48% YoY, significantly exceeding
• 2026Q1 Operating Margin9.9%Up 2.1pp YoY
• 2026Q1 Non-IFRS Net ProfitRMB1.9 billionUp 6% YoY
• Share Buyback ProgramUS$1 billionTo be executed over four years

Impact & implications

The report believes JD Health demonstrated strong earnings resilience and operational efficiency improvements in Q1, proving its advantages in supply chain and high-margin service monetization. Although nutritional supplements face near-term headwinds from regulatory compliance, accelerating pharmaceutical growth and medical equipment recovery provide buffers. Maintaining full-year guidance shows management's confidence in H2 rebound. The large buyback program will further optimize capital structure, boost EPS, and support share price.

Risks

• Regulatory risks in online pharmaceutical and healthcare services
• Increased competition from emerging players
• Slower-than-expected healthcare service monetization

What to watch

• Nutritional supplements reacceleration in H2 2026
• Impact of AI and instant retail investments on margins
• Share buyback execution progress