Incident: Dr. Ping An issued an interim results announcement for 2023. Revenue for the first half of 2023 was -21.5% year-on-year to 2.22 billion yuan; net loss for the first half of 2023 was -47.1% year-on-year to 240 million yuan.

Operating data: 23H1 The company achieved revenue of 2.22 billion yuan, or -21.5% year-on-year, mainly due to the company's active adjustment of low-strategic collaborative businesses, a decrease in related revenue, and changes in some business models; however, benefiting from higher strategic collaborative business profitability, continuous optimization of the company's business structure, a year-on-year increase in gross margin of 5.6 pct to 32.2%, driving gross profit margin of -4.8% to 7.2 billion yuan, a growth rate far better than revenue. The company's net loss to parent was 240 million yuan, -47.1% compared to 22H1's 600 million yuan, mainly due to the company's high profitability, continued strategic business growth, continuous optimization of resource allocation+gradual improvement in digital operation efficiency.

① Medical services: Achieving revenue of 1.03 billion yuan, -8.9% year-on-year. The slow growth rate was mainly due to the company's focus on resource development business, providing online consultation and medical assistance services to Ping An Group's comprehensive financial users through product collaboration, etc., and medical service revenue with low strategic coordination declined; however, gross margin was +5.9 pct to 42.9% year on year, driving gross profit ratio +5.5% to 4.4 billion yuan.

② Health services: Achieved revenue of 1.19 billion yuan, or -29.9% year-on-year, mainly due to the company's adjustment of some physical sales and other businesses with low synergy with managed medical strategies and low profitability. The gross margin was +3.4 pct to 22.9% year on year, driving gross profit margin -17.9% to 270 million yuan, which was superior to revenue.

Strategy 2.0 Deepening Progress: As an important part of Ping An Group's managed healthcare strategy, the company is the flagship of Ping An Group's healthcare ecosystem. Since the second half of '21, the company has continued to build a “managed medical+family doctor membership+O2O healthcare service” business model. On the supply side, it uses the family doctor membership system as a starting point, representing payers to integrate suppliers, link to online and offline healthcare resources, and deepen the expansion of the healthcare service network; on the demand side, the company provides all users of Ping An Group through collaboration between medical and health service rights and financial products. Lifecycle medical and health services achieve collaborative development, and at the same time provide one-stop corporate health management services for B-side enterprise customers.

① Managed Healthcare: Actively explore and strengthen business collaboration with Ping An Group. The F, B, and C terminals are progressing steadily, with F\ B as the main traffic source:

F side: On the customer and user side, it provides online/offline one-stop, 7*24 hour, active medical and health management services for comprehensive financial business users such as Ping An Life Insurance, Industrial Insurance, Health Insurance, and Banks; in terms of products and services, through business models such as “product collaboration,” “equity procurement,” and “value-added services,” it helps the Group's comprehensive financial business acquire, attract customers, and secondary transformation and penetration of users (such as Ping An Family Medicine, and Zhenxiong Run). 23H1, the F-side strategic business achieved revenue of 1.08 billion yuan, +12.6% year-on-year; in the past 12 months, there were more than 38 million paying users, +13.3% year-on-year, with a penetration rate of 16.6% among the Group's individual financial users.

Side B: On the one hand, we will deepen cooperation with enterprise customers reached through Ping An Group, and combine different service modules through the “Easy Enterprise Health” product system and the “Health Check+” and “Health Management +” solutions to create a differentiated product service matrix to provide comprehensive employee health management solutions for medium and large enterprises; on the other hand, with the experience and capabilities gained through cooperation established through the Group Pipeline, we actively strengthen self-management development. 23H1, the B-side achieved strategic business revenue of 450 million yuan, +88.9% year-on-year; the total number of service enterprises reached 1,198, an increase of 449 over the end of last year; the renewal rate for large enterprise customers was nearly 90%; the enterprise customer penetration rate into the Group's medical ecosystem reached 2.2%, and the enterprise customer employee penetration rate reached 15.6%.

② Family doctor membership system: Family doctors are the hub in the business model, helping companies integrate health care supply-side resources and improve O2O closed-loop services. As of 23H1, the company has established a team of about 50,000 internal and external physicians covering 22 departments; created specialist membership services for long-course users online, continued to cooperate with high-quality external experts offline to expand service capabilities, and has signed nearly 2,400 famous medical experts; continued to build specialist specialties, established 23 specialist centers around 8 major specialties, and created standardized pre-, post-diagnosis and treatment solutions for specialist specialties.

③ O2O Healthcare Service: Continuously deepening and improving the “online, in-store, home/enterprise” service network. In terms of medical services, as of 2023H1, in terms of medical services, the company has cooperated with nearly 4,000 hospitals, 226,000 cooperative pharmacies, achieved 1-hour drug delivery in 249 cities, opened 7*24 hour drug delivery services in 91 cities, and covered nearly 1,300 pharmacies in 26 provinces across the country through links to the DTP pharmacy network, providing medical needs protection for people with oncology; in terms of health services, there are a total of nearly 103,000 cooperative health service providers, and more than 2,000 cooperative medical examination suppliers, covering medical examinations, Various categories and forms of services such as dentistry, anti-aging, and general health.

Investment suggestions: The development strategy is clear+the pace is firm, and it is expected that the company's operating data will improve year by year. The slowdown in the company's revenue in '22 and 23H1 was mainly affected by factors such as the epidemic and active reduction of business with low strategic relevance. At present, the company has basically completed low-strategic collaborative business adjustments. In addition, the company's development strategy is clear, the path is clear, and the pace is firm. We judge that the company's performance is expected to enter a stage of long-term growth in the future. On the one hand, the company's revenue and gross profit are expected to begin to achieve positive growth in 23H2. On the other hand, improvements in cost investment efficiency and management efficiency will also drive a steady improvement in profits, and the company's operating data is expected to improve year by year. Currently, the company's 2023PS is only 3.39 times, so it is recommended to pay attention.

Risk warning: strategic transformation results fall short of expectations; regulatory policies are becoming stricter; new customer development falls short of expectations.