The growth of the company in the first half of the year is mainly driven by the special service business. In the first half of 2017, the company's revenue increased 8% year-on-year to 635 million yuan, and special services business increased 14.4% year-on-year. However, the general inpatient and outpatient business only recorded an increase of 6.7% and 8.3%, respectively. Due to the strong growth of the special services business with high gross margin, the company's gross profit margin increased by 2.2 percentage points to 25.3%. The company has repaid all bank loans and recorded a net interest income of 9 million yuan in the first half of 2017, compared with 5 million yuan in the same period in 2016. Core net profit (excluding exchange losses, listing expenses and estimated interest) increased by 40.7% to 82 million yuan compared with the same period last year, and the company's business is developing in an orderly manner, in line with our expectations.
Special services business is expected to grow more strongly in the second half of the year. Although the special services business became the main driver of the company's growth in the first half of the year, VIP medical services recorded a year-on-year growth rate of only 17%, lower than our previous forecast of 50% growth. We believe that the growth in the first half of the year comes from the addition of new beds for VIP medical services. Usually in the second half of the year, 55% will contribute 60% of the annual income. With the increase in bed utilization, we believe that VIP medical services will have a higher growth rate in the second half of the year.
Looking for new business directions. Since going public in 2016, the company has retained sufficient cash to cope with its future expansion and acquisition strategy. In August 2017, the company set up an outpatient department outside the hospital (Dongguan Songshan Lake Industrial Park), and future emerging businesses and subsequent acquisitions will provide additional growth momentum for the company.
Cut the core net profit forecast for 2017 and 2018 by 4.4% and 2.4%. We lowered our revenue forecast for 2017 and 2018 by 2.9% and 1.7%, respectively, to reflect the company's latest business changes, and lowered the company's core net profit forecast of 4.4% and 2.4%.
Maintain the buy rating and keep the target price unchanged. We believe that Kanghua Hospital has the potential to become the main force in the domestic medical service industry. The growth of the company's core business is robust, and the future growth potential mainly comes from potential acquisition projects. We maintain our buy rating with a target price unchanged of HK $14.6, which represents 23.8 / 20.2 times of the 2018 forecast price-to-earnings ratio of 2017. There is still room for 32.7% of the current share price.