The current situation of the company
Recently, in his reply to the CPPCC member's proposal, National Healthcare Security Administration explicitly mentioned the need to gradually bring appropriate assisted reproductive technology projects into the scope of payment of the medical insurance fund.
Comment
The inclusion of assisted reproductive technology into the health insurance period is expected to promote a sustained increase in permeability. In August 2022, the National Health Commission and other departments issued the guidance on the further improvement and implementation of active Fertility support measures, which mentioned that local governments would be guided to comprehensively consider various factors, and gradually bring appropriate assisted reproductive technology projects into the scope of payment of the health insurance fund 2. Recently, in his reply to the relevant proposals of members of the CPPCC, National Healthcare Security Administration once again made it clear that it is necessary to promote the inclusion of assisted reproductive technology in health insurance and reduce the medical burden on infertile patients. Affected by patients' cognition, access to high-quality technology, ability to pay and other factors, the penetration rate of assisted reproductive technology in China is still at a low level. We believe that in the future, as the country promotes the inclusion of assisted reproductive technology into health insurance and reduces the pressure on patients to pay, it is expected to drive a continuous increase in penetration; at the same time, with a series of fertility support measures and the sinking of IVF technology, the overall industry scale is expected to maintain long-term steady growth.
The industry will be greatly affected by the epidemic in 2022, and we look forward to the gradual recovery of business after the epidemic. The epidemic situation was distributed in many places in the country from January to November 2022, which had a great impact on the normal operation of hospitals and the willingness of patients to see a doctor, and limited the movement of population between high and low cities to a certain extent. During the peak of the epidemic in December 2022, the hospital service capacity and passenger flow were also affected in stages. Looking forward to the pace of recovery after the epidemic in 2023, we believe that as COVID-19 's willingness and conditions to prepare for pregnancy may be affected in the short term after recovering from infection, it will take a certain time for the recovery of overseas navigation, and 1Q23 may recover month by month on the basis of maintaining a relatively stable basis. 2Q23 combined with last year's low base is expected to enter a rapid rebound period, and the overall elasticity for the whole year of 2023 is considerable.
In the post-epidemic era, the distribution of business at home and abroad is expected to accelerate development. 1) domestic: the company enjoys a solid leading advantage in Sichuan and Dawan area, and has been significantly affected by the epidemic in 22 years. We believe that it is expected to resume normal operation and contribute to steady endogenous growth from 23 years onwards; at the same time, the acquisition and integration of the company in Hubei and Yunnan after the epidemic is expected to accelerate, and the performance is expected to improve gradually. 2) overseas: HRC in the United States continues to expand new doctors and clinics, and local patients have achieved steady growth. We expect that international patients will bring greater flexibility after the resumption of navigation. In addition, the company's layout in Hong Kong, China, Southeast Asia and other places is also expected to accelerate.
Profit forecast and valuation
Taking into account the epidemic situation and the time needed to recover later, the adjusted net profit forecast for 22-23 was lowered by 55% and 33% to 269 million yuan and 495 million yuan, and the 24-year adjusted net profit forecast of 739 million yuan was introduced. The current price corresponds to 34.4 times and 23.1 times of the 23-24-year Pram E (based on the adjusted caliber, the same below). Taking into account the plate valuation hub repair and the long-term development space of the industry and the company, we will maintain the "outperform industry" and the target price of HK $8.8, corresponding to 41.3 times and 27.7 times of the 23-24-year Pram E, which is 20.0% higher than the current upside space.
Risk.
Post-epidemic recovery is not as expected; demand-side growth of the industry is not as expected; policy changes; medical emergencies.