Core views:
The company issued a 22-year performance announcement. Revenue declined due to business strategy adjustments and the pandemic, and losses narrowed sharply year-on-year due to falling expenses. Revenue in 2022 reached 6.160 billion yuan (YoY -16.0%), net loss of 608 million yuan (down 60.5% year on year), adjusted net loss of 848 million yuan (down 40.1% year on year); gross margin in 2022 was +4.0pct to 27.3% year on year, and the company focused on optimizing businesses with high synergy with development strategies. Sales expenses were -37.1% YoY to $1,105 billion, and management expenses were -5.3% YoY to $1,748 million.
F-side and B-side paying users are growing rapidly; the share of medical service revenue continues to rise to 41%, and gross margin by business has increased. The number of annual paying users of the company increased 10.3% year on year to 43 million, of which the F side paid users exceeded 34 million, the penetration rate in the group was about 15%, and the cumulative number of service enterprises on the B side increased 458 to 978 over the same period last year, covering 3 million enterprise employees and users. Medical services: Revenue in '22 was +2.0% year on year to $2,547 million, and gross margin was +0.4pct to 36.2% year on year. Mainly due to the year-on-year increase in service and goods sales revenue, service products accounted for an increase in the share of overall revenue. Health services: Revenue in '22 was -25.3% to $3.613 billion, and gross margin was +4.3pct to 21.1% year on year, mainly due to the decline in revenue and share of some physical businesses that are less related to managed healthcare strategies and have low profitability.
Profit forecasts and investment recommendations. Various businesses gradually returned to normal in 22H2 (month-on-month recovery), and the results of the strategic adjustment of the company's business structure gradually became apparent. Total revenue growth is expected to reach more than 10% in 23-25. As investment in customer acquisition decreases and the focus is on high-quality users, it is expected that the cost rate will gradually decrease, and losses will continue to narrow. The net loss returned to the mother in 23-25 was 693/478/325 million yuan, respectively. The valuation was performed using the SOTP method. Referring to the valuation of comparable companies in Hong Kong stocks, the medical services/health service business was given 6.0/2.0 times PS in 23 years, respectively, to obtain a reasonable value of HK$25.78 per share. Maintain a “buy” rating.
Risk warning: 2F and 2B customer growth falls short of expectations; membership growth falls short of expectations; increased losses due to cost increases; stricter regulations, etc.