Steady increase in income and profits, seize the opportunity of hospital reform in state-owned enterprises
Global Medical (0266.HK) issued an announcement on October 30th, revealing the operating profile of the company and its subsidiary Global Leasing in the first three quarters of this year. The announcement shows that the operating performance of global healthcare has grown steadily in the first three quarters, with profit before tax rising by more than 30% year-on-year, and net interest margin and net interest margin stable compared with 2016 levels (4.36% and 3.31%). The quality of the company's assets is good, and the rate of non-performing assets and provision coverage are also maintained at a sound level. In the first three quarters of this year, Global Leasing achieved revenue of 2.41 billion yuan, with a pre-tax profit of 1.2 billion yuan, an increase of 25% and 30.4% respectively over the same period last year, and the pre-tax profit basically reached the level of Global Medical for the whole of 2016. The company's performance in the first three quarters is in line with our expectations, with revenue growth of more than 25% and net profit growth of 25-30% for the whole year.
The announcement clearly pointed out that while the company continues to improve the market development of medical financial business, it should pay close attention to the opportunities brought about by document No. 134 on the divestiture and reform of medical institutions in state-owned enterprises jointly issued by six ministries and commissions, and vigorously promote the investment management business of hospitals in state-owned enterprises. Recently, the supply chain platform of Xi'an International dry Port Hospital began to carry out preliminary testing, and the new hospital entered the substantive construction stage; at the same time, the company actively promoted the signing and landing of the new park project in the east of Handan first Hospital. The company's strategic layout and the outline of the integrated medical service system are gradually clear, and the hospital management business is expected to make a great breakthrough in the next few years. We reiterate that the main reasons for being optimistic about the company are as follows:
The company can provide a variety of professional services to hospital customers, and there is a broad market space for financial leasing, consulting business and department upgrading in the context of medical reform.
The company's overseas medical resources platform has obvious advantages. Over the years, it has continued to help doctors and managers of Chinese hospitals "go out" to learn advanced medical technology and hospital management knowledge, which is helpful for the company to establish a long-term and in-depth cooperative relationship with hospital customers.
The contribution income of the supply chain business of the first affiliated Hospital of West Jiaotong University next year will be gradually increased, which will support the rapid growth of performance.
In the future, the company is expected to seize the policy opportunity of hospital restructuring of state-owned enterprises to achieve the rapid development of hospital management business.
We maintain the company's "buy" rating with a reasonable valuation of HK $9.9. We forecast that the global medical net profit for 2017-2019 will be 11.8,14.8 and 1.68 billion yuan respectively, and the closing price of HK $8.24 on October 31 corresponds to 10.2,8.1 and 7.2 times the PE for 2017-2019, respectively.
Risk hint
1. Adverse changes in health care reform and PPP policy
two。 The progress of the company's hospital investment management business is not as expected.
3. The rapid rise in interest rates has caused the company's costs to rise too fast.