Investment highlight
For the first time, New Century Medical Company (01518) was given a recommended rating with a target price of HK $8.78, corresponding to a price-to-earnings ratio of 31 times 2017. The reasons are as follows:
China's private children's medical market has great potential. Frost Sullivan predicts that the size of the market could reach 12.2 billion yuan by 2020, with a compound annual growth rate of 22.1% from 2015 to 2020, of which the mid-and high-end market accounts for 64%. The entry threshold for the provision of pediatric medical services is higher, the reasons are: 1) the resources of pediatricians and professional nurses are more scarce; 2) there are many kinds of departments, multi-disciplinary cooperation and high teamwork; 3) pediatric medical diagnosis and treatment technology is more complex than adults.
The leader of private children's medical services. In 2015, the company's flagship hospital, New Century Children's Hospital, ranked first in Beijing's private pediatric market and Beijing's mid-and high-end pediatric market. We believe that with competitive advantages, the company will maintain its leading position: 1) have a strong brand; 2) acquire Beijing New Century Women's and Children's Hospital and strategically develop the market for obstetrics and gynaecology services; 3) innovatively meet the needs of the middle and high end market.
Replicable business models lay a solid foundation for expansion. Compared with other specialties, maternal and child medical service has stronger and faster replication ability. After more than 10 years of experience, the company has the ability to systematically and efficiently complete the establishment of new medical institutions.
In 2015, the company began to provide hospital consulting services, promote PPP project experience, and explore opportunities for expansion. The biggest difference between us and the market. The expansion strategy of Healthcare in the new century is clearer than that of similar companies; the company has partnered with Jiahua Likang to cultivate Likang's hospitals in second-tier cities.
Potential catalysts: 1) the performance of Beijing Women's and Children's Hospital in the new century exceeded expectations; 2) extension and renewal.
Profit forecast and valuation
Considering all the consolidation of Beijing New Century Women's and Children's Hospital in 2016 and the endogenous growth of the company, we estimate that the annual EPS of the company in 2016-17-18 is 0.10,0.26,0.30 yuan, respectively, and the CAGR is 74%.
Risk.
The competition in the medical market for women and children is fierce.