Key points of investment:

Deeply involved in smart healthcare and government affairs, and China Life Insurance took the lead in promoting business improvement

The company has formed a “3+2" business structure. The traditional advantage sectors include smart healthcare, smart government, and ICT. It is in a leading position in the industry. The strategic sector is health management and smart cities. In November 2019, China Life Insurance became the company's largest shareholder. It participated in governance, and the company's business situation improved. In January 2023, the company completed a fixed increase issuance, and the increase in China Life Insurance's holdings indicates a strategic investment position.

The construction of the data element market has entered the implementation stage

The “Twenty Data Rules” initially established China's data infrastructure system, various regions introduced relevant rules one after another, and the construction of a data element market entered the implementation stage. Public data is an important part of data resources, and authorized operation is expected to become an important method of open sharing, bringing construction requirements such as data governance and operation platforms, and opening up new business models for data element circulation.

It is expected to benefit profoundly from the transformation of data elements in health care and other fields. The company's smart healthcare business has formed a full line of products and solutions, laid out data application fields, has two relevant national innovation platforms, built the first provincial three-medicine joint informatization project implemented in the country, and established a joint venture health big data platform with Ning Shu Science and Technology Innovation. The company is deeply involved in the digitalization of cities such as Shanghai and the construction of urban Internet portals, which is expected to benefit from the construction of local data elements.

Profit Forecasts, Valuations, and Ratings

Based on the above changes in the company and with reference to the 2022 performance forecast, we adjusted the company's 2022-2024 revenue forecast from 35.09/40.98/4.864 billion yuan to 32.44/39.84/4.992 billion yuan. The corresponding growth rate was -7.65%/22.79%/25.31%, respectively, and the net profit of the mother was adjusted from -0.55/0.87/167 to -305/0.96/304 million. The corresponding growth rate was -540.12%/131.48%/216.96%, respectively. The EPS was -0.26/0.07/0.21 yuan/share, respectively, and the CAGR was 63.76%. Considering that data element market construction has entered the implementation stage, the market for data products and services is broad, and the company's smart healthcare, smart government and other businesses are expected to benefit deeply. Referring to the comparable company's average PS of 7.95 times in 2023, we gave the company 8 times PS in 2023, with a target price of 22 yuan to maintain the “buy” rating.

Risk warning: policy implementation falls short of expectations, products and technology fall short of expectations, industry competition increases risks