Events:
The company announced the third quarterly report of 2020: in the first three quarters of 2020, the company realized revenue of 170 million yuan, down 4.72% from the same period last year; realized return net profit of 1.77 million yuan, down 83.73% from the same period last year; and realized non-return net profit of-533000 yuan, compared with 3.83 million yuan in the same period last year.
Main points of investment:
Q3 single-quarter performance growth rate is significantly positive, the whole year can still be expected. The ICU and operating room information construction of the hospital in the epidemic was stagnant, and the company's medical information project was delayed, so the performance of 2020H1 company was greatly affected, but the company's business recovered well in the third quarter. Q3 single-quarter revenue growth rate was 39.6% (Q1, Q2 were-59.99%,-8.42% respectively), Q3 single-quarter net profit growth rate reached 101.46% (Q1, Q2 were-300.69%,-15.02% respectively).
As hospital information projects are usually checked and accepted at the end of the year, the company's performance has obvious seasonal characteristics, and the Q4 single-quarter performance accounts for a relatively large proportion in the whole year. In 2019, the company's Q4 single-quarter income accounted for 46.6% of the annual income, and the return net profit accounted for 76.8% of the whole year. We believe that the construction of early warning and prevention and control system of regional public health and the construction of hospital ICU will be strengthened after the epidemic. The stable phase of the epidemic in the second half of the year is the window period of hospital clinical information construction. As the leader of domestic CIS, the company will benefit deeply. Although the company's performance in the first half of the year is poor, it can still be expected for the whole year.
Business two-wheel drive has been initially formed and is optimistic about the development of the company's assisted reproductive business. In October 2019, the company completed the 51% equity acquisition of Haikou Mary Hospital, formally entered the assisted reproductive industry, and continued to extend the acquisition of reproductive medicine online and offline resources from Queen Mary Hospital; in June 2020, the company announced its intention to purchase no less than 20% of Guowei Reproductive Hospital; in August 2020, the company announced that it planned to acquire 51% of Heilongjiang Tianyuan Maternity Hospital Co., Ltd. The continuous extension proves the company's determination and strength in the field of assisted reproduction, and the business pattern of medical clinical informatization + two-wheel drive of assisted reproduction has been initially formed. Assisted reproduction is the blue ocean market. On the demand side, the national infertility rate is 12% 15%, and the number of patients is more than 50 million, 20% of which require artificial assisted reproductive intervention. At present, the penetration rate of assisted reproductive technology in China is only 7%, which is far lower than 30% in the United States. The long-term market space for assisted reproduction is more than 100 billion. On the supply side, there are 498 assisted reproductive licenses in China by the end of 2018, most of which are public hospitals. Domestic assisted reproductive licenses, especially in first-tier cities and private cities, 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 Q3 performance growth rate has become positive, 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 69-53-43, respectively, maintaining a "buy" rating.
Risk tips: 1) the risk of failure of the company's extension acquisition; 2) the uncertainty risk of the company's increased implementation; 3) the risk of the company's performance falling short of expectations; and 4) systemic risk.