Key points of investment

Core logic: Boao International Hospital is an A-share scarce asset, high policy barriers, Japan's top expert team, new international technology and equipment, and high profit margins; after the epidemic, the volume of high-end medical services such as Boao International Hospital and Hubei Ezhou No. 2 Hospital, and inflection points such as equipment and large infusions in '23 were clear, equity incentives were implemented for the first time after the IPO, the divestment of non-performing assets was completed, and goodwill was calculated. 2023-2025 may see extremely high growth.

Boao International Hospital, which has international influence, first tested high policy barriers, and the regenerative medicine innovation platform is expected to start a second growth curve; the Ezhou Second Level III General Hospital will soon be put into operation to quickly release performance.

High policy barriers: Boao International Hospital is located in the pioneering area of Lecheng, Boao. It has pioneering privileges and high policy barriers to new technology, and enjoys policy dividends as a leading local hospital; top expert team: it has a strong professional team such as Oda Treatment in Japan, introduced a full set of immune cell culture technology from Oda Hospital approved by Japan's Ministry of Health and Welfare, imported culture solution from Japan, etc., and autologous adipose stem cells obtained three batches of test reports from the Central Inspection Institute; international equipment: Germany's INUS double membrane targeted blood purification technology, introduced biohyAldeW (plastic surgery) from the Korean listed company BioHyplus (plastic surgery) Four high-end medical and aesthetic devices, including subcutaneous filler materials); new research direction: research in four areas, including development of diseases such as knee osteoarthritis and chronic obstructive pulmonary disease. We expect the revenue of Boao International Hospital to reach 2/355 million in 2023-2025, respectively.

The new hospital area of Ezhou Second Hospital was completed. It was put into trial operation in March '23 and officially put into operation in May '23. The new and old hospitals in Ezhou No. 2 have a total of 1,200 beds. Currently, the old hospital area is almost full of production. It contributes about 100 million yuan in revenue per year, with a profit of about 15 million yuan. The revenue and profit peaks of the new and elderly hospitals of Ezhou No. 2 Hospital are expected to reach 600 million and 100 million respectively.

Medical devices were rapidly sold domestically, and new infusion products were continuously approved: the company's cooperative relationship with RTI in the US continued to contribute to the company's steady increase in cash flow; on the domestic side: After obtaining the registration certificate in '21, we actively participated in online tenders in various provinces. Sales rose rapidly and won bids in 7 provinces including Guangxi. We expect safety syringes to continue to grow by more than 10% overseas and domestic growth of more than 40% in 23-25; prefilled rinsers obtained a registration certificate at the end of the year 21, and production capacity construction is expected to begin the following year. The company's production capacity is expected to exceed 200 million units in 23. Already in Ningxia After six provinces win the bid, sales are expected to exceed 40 million units in '23. In the large infusion section, 3000ml sorbitol mannitol and 500ml balanced salt solutions were approved one after another, opening up new growth space.

The first equity incentive plan after the IPO was released, demonstrating the company's confidence in development and binding core management interests in the medium term: this incentive plan was the first equity incentive after listing. A total of 42 people were incentivized for the three fiscal years 2023-2025. Company-level performance assessment targets: net profit of 2023-2025 was not less than 1.8/23/30 billion yuan respectively, with a three-year compound growth rate of 30%. The exercise price is 12.01 yuan, which is comparable to the company's current stock price, demonstrating the company's strong confidence.

Profit forecast and investment rating: We are optimistic about the company's potential and development on the medical service circuit. We expect the company's net profit to be 0.37/1990/274 million yuan in 2022-2024, and PE corresponding to the current market value is 190X/37X/26X. First coverage, giving a “buy” rating.

Risk warning: New product promotion falls short of expected risks, in-store recovery falls short of expected risks, etc.