A leader in healthcare services in the Greater Bay Area, with coverage for the first time, was given a “buy” rating. Hima Ophthalmology focuses on medical services in the Greater Bay Area and adopts a dual specialty of “ophthalmology+oral” and a “service+product” strategy to drive growth. The actual controller, Professor Lam Shun-chao, is a leading figure in ophthalmology in the Asia-Pacific region. He has a strong and scarce competitive advantage. In addition, Hong Kong-funded enterprises have received great local support under policies related to the development of the Greater Bay Area, such as “Hong Kong and Macau Pharmaceutical Connect”, thereby increasing their competitive advantage. In the short term, the company's performance is expected to rise rapidly, benefiting from the liberalization of epidemic control and customs clearance in Shenzhen and Hong Kong. The new hospitals opened during the epidemic are also expected to quickly achieve profit and loss balance. Demand for refractive treatment in the Greater Bay Area is strong, supply still has a lot of room for expansion, ophthalmology and dental treatment in Hong Kong, China is seriously undersupplied, and the price gap of medical services between Shenzhen and Hong Kong is expected to accelerate. We expect the company's revenue for 2023-2025 to be HK$1,946/2,48/HK$3,080 million, respectively, net profit of HK$0.59/0.84/HK$187 million, and HK$0.05/0.07/0.15 per share respectively. The current stock price corresponds to PS 2.54/1.99/1.60 times, respectively, covering the first time and giving it a “buy” rating.

The leading position of ophthalmology in Hong Kong, China is stable, the mainland is expanding, and the new hospital is expected to quickly achieve profit. Hima Ophthalmology is the leading private ophthalmology department in Hong Kong, China, with a market share of more than 10%. The 2016-2022 annual revenue CAGR has reached 25% through new construction and mergers and acquisitions. Its clinic layout and number of doctors are in a leading position, and the leading position in the industry is stable. The company's development strategy in the mainland is to build a reputation for the level of international medical services for the expert team and international advisory team, help the initial drainage, focus on consumer healthcare, and then introduce local experts to strengthen segmented specialty construction. It is expected that 3-4 hospitals will reach a balance of profit and loss in 2023, and the company will expand at an accelerated pace. It is expected that 4-5 new hospitals will be added in 2023, with the goal of completing the entire Greater Bay Area urban layout by 2025.

The dental business focuses on patients in Hong Kong, China. The business recovered rapidly after customs clearance, and has great long-term development potential. Shenzhen iHealth focused on dental treatment for Hong Kong visitors. Before the epidemic, the number of patients in Hong Kong, China accounted for 60%. The Shenzhen-Hong Kong customs clearance quickly recovered to pre-epidemic levels. Shenzhen Elken's revenue reached 121 million yuan from January to May 2023, an increase of 183.2% over the previous year, close to 2022 full-year revenue. In the long run, Shenzhen Aikangjian has great potential for long-term development based on favorable conditions such as unequal supply and demand for dental care services in Hong Kong, China, large price differences between Shenzhen and Hong Kong, and its own high-quality reputation.

Risk warning: new hospitals are growing less than expected; expansion falls short of expectations.