Revenue continued to grow, and losses gradually narrowed: after changing the actual controller to China Guoxin in 2017, the company focused on building a “China Health Insurance Service System”, developing a system with digital health insurance business as the two wings, digital medicine and digital medical services, to achieve continuous revenue growth in 2019-2022. In 2022, the company achieved revenue of about 311 million yuan, an increase of 23.19% over the previous year; the net profit returned to the mother was -84 million yuan, and the loss narrowed 51.96% year on year. In the first quarter of 2023, benefiting from the good development of the digital pharmaceutical business, the company's performance continued to grow, achieving revenue of about 56 million yuan, an increase of 46.94% over the previous year; achieving net profit of -44 million yuan to the mother, and the loss narrowed 11.25% year-on-year.
Combined with the seasonal characteristics of industry revenue, the company's revenue is expected to maintain a relatively rapid growth trend throughout the year.
With the gradual integration of AI, the health insurance industry is expected to accelerate development: in addition to diagnostic fields such as medical imaging, AI is also gradually being integrated into medical insurance and other fields. AI can not only make personalized recommendations and predictions by combining electronic medical records and other user data, but also optimize doctor-patient communication and diagnosis processes. Nuance, a subsidiary of Microsoft, has launched a version of its voice recognition software Dragon equipped with GPT-4, which can quickly generate standardized symptoms and treatment records to facilitate medical insurance intervention.
The application of AI technology is expected to accelerate the development of the health insurance industry, especially the development of information systems such as DRG/DIP. The company is expected to benefit from leading domestic technology and experience accumulation such as “solutions to enhance intelligent health insurance supervision capabilities based on artificial intelligence and big data technology”.
The issuance of additional issues continues to advance, and the business system is expected to be further optimized: the company recently released a revised version of the fixed increase solicitation letter, indicating that the additional issuance matters are progressing steadily. Guoxin Development, a wholly-owned subsidiary of the central enterprise, which is the actual controller of the company, plans to participate in this launch. It plans to subscribe for no less than 25.98% and no more than 40.00% of the increase. The company plans to use this additional investment fund mainly for projects such as the Three Medical Digital Service System Construction Project. Among them, the estimated gross margin of each revenue-generating project is higher than 40%, which is significantly higher than the gross profit margin of the company's 2022 annual report. If the fundraising project is successfully implemented, it will provide great help for the company's overall gross margin repair, especially for the gross margin of the company's digital health insurance business to catch up with companies comparable in the industry.
Investment advice: The gross margin of the company's digital health insurance business is expected to recover with the scale effect, and the overall profit loss is expected to reverse. We expect the company's revenue for 2023-2025 to be 521, 664, and 800 million yuan respectively, net profit of the mother to be 0.02, 0.40, and 79 billion yuan respectively, and EPS is 0.00, 0.04, and 0.09 yuan respectively. The first coverage gave an “increase in holdings” rating.
Risk warning: Market competition intensifies, the macro environment falls short of expectations, and product development falls short of expectations.