The policy of financial discount is beneficial to the upgrading of hospitals.
The State Council held an executive meeting on September 7 and decided to provide loan discounts to institutions in other areas such as health care to boost consumption and investment (links). The relevant subsidy policies include the provision of low-interest loans (eligible institutions can apply for loans of no more than 3.2 per cent interest rate (link) by the end of 22 years, which is lower than 3.65 per cent of the current one-year loan market quoted interest rate (LPR), and financial discounts. It is reported that the low-interest loan can be used for 1) medical equipment procurement or 2) hospital renovation and upgrading. We believe that the company is expected to benefit from this and make use of this preferential loan to accelerate the upgrading of relevant medical institutions and lay a good foundation for the long-term development of the post-epidemic era.
Epitaxial expansion is still the key direction
Total income in the first half of 2002 increased 61% year-on-year to about 2.9 billion yuan (of which 55% of the year-on-year income growth was contributed by consolidation), mainly from state-owned enterprise hospitals and for-profit hospitals (there were 4 hospitals in the second half of 21 years and WISCO hospitals in the first half of 22). We expect revenue to grow by 50% year-on-year in the second half of 22, mainly due to increased economies of scale and potential recovery after the epidemic has been alleviated. After the overall reform of central enterprise hospitals, the company said that its future extension M & A targets will include secondary / tertiary hospitals in major cities. We believe that the company is in a favorable position in the future extension expansion, based on 1) its deep state-owned enterprise background and sufficient net cash reserves (1.2 billion yuan at the end of the first half of 22 years), 2) a sound national hospital network (12000 beds in the company's 120 medical institutions), 3) and China Resources Health (the company's major shareholder). With about 10, 000 additional beds, there is synergy with China Resources Land, the real estate division of China Resources Group, which has partnered with the company on the Yue Nianhua Rehabilitation Hospital project.
Maintain the overweight rating and keep the segment plus total valuation target price unchanged at HK $12.1 We maintain the original profit forecast and keep the target price at HK $12.1. We believe that the risk-return of the company's current share price is still attractive (the forward price-to-earnings ratio for fiscal year 22 / 23 is 9 / 8, respectively, and the projected dividend yield for fiscal 23 is 4%). Investment risk: the progress of epitaxial M & An is lower than expected, epidemic disturbance and health insurance payment risk and so on.