Incident: The company announced that in its semi-annual report for 2023, 2023H1 achieved operating income of 1,334 million yuan, an increase of 17.2% over the previous year, and achieved net profit of 224 million yuan, an increase of 17.6% over the previous year.
The gross profit margin and net interest rate have increased, and the overall cost ratio has stabilized. The company's 2023H1 management expense ratio was 14.1%, down 2.4 pct year on year; sales expense ratio was 6.5%, up 1.8 pct year on year; and financial expense ratio was 3.2%, up 0.3 pct year on year. The company's gross margin in 2023H1 was 42.3%, up 1.5 pct year on year, net profit margin was 16.8%, up 0.3 pct year on year.
Business in the US and Shenzhen grew steadily, and Wuhan ARS grew rapidly after it recovered. By region, 2023H1 Chengdu business achieved revenue of 687 million yuan, down 2% year on year; Shenzhen business achieved revenue of 188 million yuan, up 13.8% year on year; Kunming business achieved revenue of 123 million yuan; Wuhan business achieved revenue of 16.61 million yuan, up 152% year on year; rapid growth after ARS business resumed; Hong Kong business achieved revenue of 30.47 million yuan, up 16.1% year on year, and US business achieved revenue of 288 million yuan, up 21% year on year.
The new property in Shenzhen is expected to further expand production capacity and expand the business network through self-construction or acquisition. In 2022, the company acquired a new property for the future operation of Shenzhen Zhongshan Hospital. The area is nearly five times the size of the existing property. It is expected to be relocated before the end of the second quarter of 2024. The new property will enable Shenzhen Zhongshan Hospital to further expand the scope of services, expand special services, provide sufficient space and a better medical environment. In terms of expansion, the company in mainland China will continue to expand its market share in Sichuan and Yunnan provinces by using the hospital networks in Chengdu and Kunming, and at the same time further expand to Guizhou Province, driving the company's influence throughout the southwest region of mainland China. On the US side, HRC Medical has 4 core clinics and 6 satellite clinics in Los Angeles and San Diego in the western US, further expanding HRC Medical's market influence within the region. In Southeast Asia, in March 2020, the company acquired an assisted reproduction license in the Moding Special Administrative Region of Laos and established Jinrui Medical Center. Trial operation began in August 2023.
Maintain a “buy” rating. Based on the gradual recovery of domestic and international terminal demand, the company's business network is further expanded. The EPS is expected to be 0.15/0.21/0.27 yuan in 23-25, maintaining the “buy” rating.
Risk warning: policy risk; risk of increased industry competition; risk of falling short of expectations