Event: on the evening of August 22, the Great Oriental released its semi-annual report 2023. During the reporting period, the company realized operating income of 1.764 billion yuan (year-on-year + 13.91%), net profit of 139 million yuan (year-on-year), and non-return net profit of 40 million yuan (year-on-year-4.70%).

The overall financial data for the second quarter were positive: Q2 achieved operating income of 854 million yuan (23.79% compared with the same period last year), net profit of 113 million yuan (8.73% compared with the same period last year), and net profit of 27 million yuan (due to the relatively low base of 2022 Q2, a sharp increase over the same period last year). 2023Q2 gross profit margin is 15.72% (2022Q2 is 18.25%), sales expense rate is 2.92% (2022Q2 is 3.45%), management expense rate is 8.68% (2022Q2 is 10.89%), net profit is 13.63% (2022Q2 is 16.33%).

The recovery of business such as commercial retail is obvious. 1. The company's department store retail business "returns to operation and continues to be new" with the goal of "sticking to market share", accumulating energy and increasing efficiency continuously. The company's department store retail business achieved an operating income of 370 million yuan, an increase of 3.88% over the same period in 2022, and a gross profit of 137 million yuan, down 3.26% from the same period last year. 2. Sanfengqiao Food Plate, through R & D and production process polishing, has realized the bagging of cooked food products and the standardization and upgrading of all products, and the rate of fresh cooked food and packaged products have increased compared with the same period last year. Sanfengqiao catering plate, through the development of online services, online takeout and other measures, continue to introduce traffic, increase exposure, enhance word-of-mouth, strengthen marketing promotion. During the reporting period, the operating income of Sanfengqiao food business reached 100 million yuan, an increase of 45.31% over the same period last year. Sanfengqiao catering business achieved an operating income of 30.6787 million yuan, an increase of 16.33% over the same period last year.

The company's medical and health business is sound. By the end of the reporting period, the number of chain organizations had reached 50. Among them: under the medical business section of the company, in addition to the general hospital "Shuyang Zhongxing Hospital", there are 23 outpatient clinics of "healthy Pediatrics" with "children's endocrine growth and development" as the core, and "children's mental health".

The core "Yahn Health" has 21 service centers, and the "Zhibei Medical" with "Child Health Care and Rehabilitation" as the core has 6 outpatient departments. During the reporting period, the company's medical and health business achieved an operating income of 1.224 billion yuan and a gross profit of 87 million yuan.

Investment advice. The company's non-recurring profit and loss items in the first half of the year contributed about 99 million of the net return profit, and the apparent return net profit corresponding to PE (TTM) was about 26.35X. We expect the company's traditional main business to be stable and the medical business to maintain a high growth rate. The company's net profit deducted from 2023 to 2025 will be 80 million yuan, 90 million yuan and 100 million yuan respectively. From a comparable perspective, the average PS (TTM) of industry medical services companies (closing on August 22, 2023) is about 7.50X, while the PS (TTM) of Greater Oriental (closing on August 22, 2023), excluding non-health business, is 1.67X. Maintain a "buy" rating.

Risk hints: macroeconomic and policy risks; industry competition risks; medical service business is still in the cultivation period, management and business risks.