Key Takeaways:
Yidu Tech (02158) received a reiterated "Buy" rating and an HK$11.00 price target from Citigroup after the health-tech company forecast its first-ever profit.
"The company's break-even is a significant milestone, driven by accelerating revenue growth and margin expansion from its AI-powered products," a Citigroup research note stated on April 20.
Yidu Tech issued a positive profit warning, projecting a net profit between RMB 41 million and RMB 56 million for the fiscal year 2026. This outlook significantly exceeded prior institutional consensus expectations. Citi's HK$11.00 target is based on a sum-of-the-parts (SOTP) valuation, which the bank calculated using a weighted average cost of capital (WACC) of 12.5 percent and a 3.0 percent perpetual growth rate.
The bank's valuation breaks down to HK$2.8 per share for the big data platform and solutions business, HK$2.0 for life science solutions, HK$2.7 for its health management platform, and HK$3.4 in net cash.
According to Citi, the move to profitability stems from three key factors: accelerated revenue growth backed by a strong pipeline of new orders, expanded gross margins from higher-value AI-integrated products, and improved operating efficiency as the business scales.
The bank believes Yidu Tech's business segments all have scalable models and that its use of AI will continue to drive operational improvements. Citigroup analysts project that the company's revenue growth will accelerate further from fiscal year 2027, putting its earnings per share on a rapid growth trajectory.
The achievement of profitability is a major turning point for Yidu Tech, potentially attracting new investors who were waiting for a clearer path to positive earnings. Investors will now watch for the official full-year results to confirm the preliminary figures and for further details on the growth of its AI-integrated product suite.
This article is for informational purposes only and does not constitute investment advice.
