23H1 The revenue side increased sharply, and the profit side narrowed significantly. The number of medical treatments has recovered rapidly, and it is expected that the break-even inflection point will be realized in the second half of the year. The Central Hospital continues to consolidate its dominant disciplines and promote science, education, and research collaboration in an integrated manner. The company was given a target price of 11 yuan and the “buy” rating was maintained.

23H1 The revenue side increased sharply, and the profit side narrowed significantly. The company released its 2023 annual report. During the reporting period, it achieved revenue of 2,210 million yuan (+106.91% year-on-year) and net profit of 222 million yuan (loss narrowed significantly year-on-year). The company's various operating indicators improved during the reporting period: ① net cash flow from operating activities was 410 million yuan, which changed from negative to positive year on year; ② achieved a gross sales margin of 7.76%, a significant improvement over the previous year; ③ 23Q2 achieved revenue of 1,151 billion yuan in a single quarter (the highest in a single quarter in history), a sharp increase of 50.78% over the previous year; ④ 23Q2 achieved net profit of 148 million yuan in a single quarter, and the loss margin narrowed year-on-year. The company's performance gradually improved during the reporting period. The 2023H1 revenue side achieved rapid growth under the investment and macroeconomic recovery of the North Campus, which is in line with previous expectations.

The number of medical treatments has recovered rapidly, and it is expected that the break-even inflection point will be realized in the second half of the year. The 2023H1 high-tech hospital achieved outpatient emergency services of 543,500 people, an increase of 71.88% over the previous year; the number of inpatient services was 30,500, an increase of 98.05%; and the number of surgeries was 8669, an increase of 92.05% over the previous year. The highest number of Japanese emergency services and daily patients during the reporting period reached 4952/1599, respectively. 2023H1 International Medical Center Hospital (including North Hospital) achieved 524,600 outpatient emergency services, up 163.49% year on year; 55,400 inpatient services, up 123.39% year on year; 26,200 surgeries, up 104.69% year on year. The highest number of Japanese emergency services and daily patients during the reporting period reached 4525/3307, respectively. The company's performance in 2023 is expected to benefit significantly from the recovery in in-hospital diagnosis and treatment volume (where the central hospital has relatively more room to climb), and is expected to achieve monthly profit and loss balance in the second half of the year.

The Central Hospital continues to consolidate its dominant disciplines and promote science, education, and research collaboration in an integrated manner. In the first half of 2023, the Central Hospital opened 32 new departments (including 18 new departments after trial operation in the North Hospital). At the same time, the Department of Oncology was approved to upgrade key clinical specialty construction projects. In the first half of the year, the Central Hospital brought in 854 personnel of various categories, including 117 with a master's degree or above and 133 with intermediate or above titles. During the reporting period, the Central Hospital applied for 24 projects from the National Natural Science Foundation of China in 2024, received 1 national key research and development plan in the 13th Five-Year Plan, and 35 scientific research projects from the Provincial Science and Technology Department in 2024. At the same time, the company's layout of specialty specialties such as assisted reproduction, plastic surgery, high-end gynecology, and rehabilitation and treatment continued to advance. During the reporting period, an international medical city composed of 20 specialist hospitals began to take shape. In the medium to long term, the company's medical service capabilities are expected to be deepened and comprehensively improved.

Risk factors: risk of changes in medical insurance payment policies; risk of medical accidents; the company's hospital beds fell short of expectations; the company's new business volume fell short of expectations.

Profit prediction and valuation: The company is a large-scale comprehensive medical service group that is scarce in China and is actively exploring the “comprehensive medical+special specialty” business model. We maintain the company's 2023-2025 EPS forecast of 0.01/0.11/0.21 yuan. Considering that the company completed 99% of the equity transfer of Shangluo International Medical Center Hospital Co., Ltd. on August 22, and that after the opening of the North Campus of Central Hospital at the beginning of the year, the total number of beds in the three core hospitals (Gaoxin Hospital, Central Hospital and Central Hospital North Campus) reached 10,000, and there is a high degree of certainty that future bed occupancy rate increases and revenue growth is highly certain, we judge that revenue has gradually entered a period of steady growth since 2023 (the revenue side in 2022 is greatly affected by the objective environment), but the profit side is still at a loss period, so we think it is reasonable to choose PS valuation in the relative valuation method. Considering that the average PS of comparable companies Aier Ophthalmology and Tongce Medical in 2023 was 8.5 times (both are in agreement with Wind), and that the company's core hospital, central hospital and north hospital are still in a climbing period, carefully give the company 5-6 x PS (median 5.5 x PS) for 2023, corresponding to a target price of 11 yuan, and maintain the “buy” rating.