Main points of investment
Event: the company's 2016H1 realized operating income of 1.81 billion yuan (+ 15.3%), net profit of 110 million yuan (- 5.3%), and non-return net profit of 105 million yuan (+ 5.3%).
While the investment in doctors' salaries has increased, Menonning is still declining. 1) in the field of medical services, Suqian, Yizheng and Anqing hospitals achieved a total income of 680 million yuan (+ 4.3%) and a net profit of 50.05 million yuan (- 26.7%). Among them, the net profit of Suqian Hospital decreased by 33.4% and that of Anqing Hospital decreased by 18.1%. The main reason is that the company has adjusted the salary of doctors, resulting in an increase in fees. We believe that the investment in doctors' salary is aimed at grasping the core medical resources and can enhance the competitiveness of hospitals. 2) the high growth of the company's revenue is driven by the expansion of the distribution scale of East China Pharmaceutical, a commercial subsidiary, with an income of 1.13 billion yuan (+ 17.9%). The rapid growth of the commercial sector has led to a structural decline in gross profit margin, which is 2.8% lower than the same period last year. 3) We estimate that the growth rate of Mailuoning is still on a downward trend, and the decline is estimated to be less than 5% from the parent company's report.
Medical services are a long-term focus, and the pharmaceutical business may stabilize. 1) Medical service is the strategic focus of the company, the three hospitals are not saturated in the local market, the growth momentum is still sufficient; in the future, it may continue to deepen the reform of public hospitals, or there may be extension expectations. 2) the pharmaceutical business has been under pressure for a long time and may stabilize. Under the double pressure of bidding and safety of traditional Chinese medicine injection, the sales of the core variety Mailuoning injection have been declining for six consecutive years, and the sales volume and selling price are basically at the bottom, and it is expected that it will stabilize in 2017.
The reform of the medical system continues to deepen, and the company has a broad space for development in the future. 1) since 2016, the focus of medical system reform has shifted from "drug reform" to comprehensive reform. with the further optimization of the allocation of medical resources, the competitive environment of the industry will be more market-oriented in the future. the service quality and operation ability of private hospitals will be the focus of competition. the company has rich experience in hospital management, and its core competitiveness is expected to be further prominent. 2) the National Development and Reform Commission has issued a circular on printing and issuing opinions on promoting the price reform of medical services, implementing hierarchical management of medical service prices. We believe that one of the purposes is to adjust the supply pattern of medical services. In the future, public hospitals will focus on grass-roots medical needs, high value-added services represented by special medical services will be undertaken by private medical institutions, and the company will be a social medical participant. Will enjoy a broader space for development.
Profit forecast and investment advice. It is estimated that the EPS from 2016 to 2018 will be 0.43,0.53,0.68yuan, respectively, and the corresponding PE will be 33 times, 26 times and 21 times respectively. The relevant policies will help to increase the future performance imagination space of the company (with great potential for medical services). It is expected that in the later stage, the layout of the medical service sector will still be enlarged through extension expansion, and the expectation of state-owned enterprise reform will be kept to maintain the "buy" rating.
Risk tips: bidding price reduction or higher-than-expected risk, medical service growth or less than expected risk.