Events:
The company announced its semi-annual report 2020: 2020H1 achieved revenue of 89.07 million yuan, a decrease of 25.97% over the same period last year, and a net profit of-7.71 million yuan, compared with 6.16 million yuan in the same period last year.
The company announced that it intends to acquire 51% of the shares of Heilongjiang Tianyuan Obstetrics and Gynecology Hospital Co., Ltd., with an initial valuation of 165 million yuan.
Main points of investment:
Q2 performance improved, medical IT gross profit margin increased. Clinical medical informatization is the company's traditional main business, the downstream customer is the hospital, and the product application scene is in the hospital operating room or ICU ward. Under the influence of the epidemic, the information construction of relevant departments in the hospital is stagnant, which delays the construction of the company's medical informatization project. The company's Q2 single-quarter revenue growth rate was-8.42% compared with the same period last year, and the year-on-year growth rate of net profit was-15.02%. Compared with Q2's single-quarter performance, Q2's performance was significantly improved. In terms of medical IT, the company's homemade software projects increased in the first half of the year, and the revenue share increased to 66.73%, an increase of 10.88 pct compared with the same period last year; the overall solution accounted for 12.89% of revenue, a decrease in 13pct compared with the same period last year.
The increase in the proportion of revenue from high-margin homemade software products led to an increase in the company's overall gross profit margin. The company's medical IT product gross profit margin reached 80.95%, an increase of 4.94pct over the same period last year. In terms of assisted reproductive services, Queen Mary Hospital achieved an income of 16.1 million yuan and a net profit of 5.1 million yuan in the first half of the year. We believe that after the epidemic, the construction of regional public health early warning and prevention and control system as well as hospital ICU construction will be strengthened, and the company as a domestic CIS leader will benefit deeply.
It is proposed to acquire 51% equity in Tianyuan Maternity Hospital, and the assisted reproductive business will continue to be extended. The company plans to buy 51% equity of Heilongjiang Tianyuan Obstetrics and Gynecology Hospital for 165 million yuan. Tianyuan Obstetrics and Gynecology Hospital is a third-level gynecology and obstetrics hospital in Heilongjiang Province. it has technical reserves in obstetrics and gynecology, assisted reproduction and infertility department and pediatrics, and has the formal operation qualification of husband sperm artificial insemination (AIH). 2020H1 Tianyuan Obstetrics and Gynecology Hospital has a revenue of 30.2 million yuan and a net profit of-7 million yuan. The company began to enter the field of assisted reproductive medical services through extension in 2019, completed the 51% equity acquisition of Haikou Mary Hospital in October 2019, and signed an agreement in June 2020 to purchase no less than 20% of the shares in Beijing Guowei Reproductive Hospital. The continuous extension proves the company's determination and strength in the field of assisted reproduction. Assisted reproduction is a blue ocean market, with more than 77 million infertile patients nationwide, with an annual compound increase of about 10%, while domestic assisted reproductive licenses, especially those in first-tier cities and private enterprises, are scarce resources. We are optimistic about the development potential of the assisted reproductive industry and continue to be optimistic about the company's ability to integrate resources in this area.
Profit forecast and investment rating: maintain the "buy" rating. We believe that the company's performance has improved in the second quarter, and the assisted reproductive business continues to be extended. We are optimistic about the increase in government and hospital medical information expenditure after the epidemic, as well as the development potential of the company's assisted reproductive business. We estimate that the company's EPS for 2020-2022 will be 0.65 soybean 0.85 plus 1.05 yuan (regardless of the impact of equity acquisition and fixed increase on the company's performance and equity), and the corresponding share price will be PE times 83-63-51, respectively, maintaining a "buy" rating.
Risk hints: 1) the risk of failure of the company's extension acquisition; 2) the uncertainty risk of the company's increased implementation; 3) the risk that the company's performance is less than expected; 4) systemic risk.