Brief performance review
On August 29, 2023, the company announced the results for the first half of 2023. In 2023, H1 achieved revenue of 1.33 billion yuan (+17.2%) and realized net profit of 220 million yuan (+17.6%).
Management analysis
The scope of domestic services continues to expand, and regional business is steadily recovering. Chengdu sector. In April 2023, Chengdu Xilong Gynecology Hospital and Sichuan Jinxin Women's and Children's Hospital merged their two licenses and changed their name to Sichuan Jinxin Xilong Women's and Children's Hospital. After Sichuan Jinxin Xilong Women's and Children's Hospital (Jingxiu Hospital) obtained molecular diagnosis qualification in January, Bisheng Hospital obtained PGT trial operation qualification in July, and the scope of services continues to expand. The Shenzhen and Greater Bay Area sectors focused on business recovery and the establishment of new hospitals in the first half of the year. In H1 in '23, the number of initial visits to assisted reproductive health services at Zhongshan Urology Hospital in Shenzhen was +32.7% year-on-year, and revenue was +13.8%. The new building of nearly 50,000 square meters is expected to be officially relocated in Q2 in '24. In Wuhan and Kunming, in '23, the business of Wuhan Jinxin Hospital continued to recover, revenue was +152% over the same period, profit loss decreased by about 17 million yuan, and obtained antenatal screening qualifications in May. The number of IVF treatment cycles carried out by the Kunming business was +39% over the same period, and its influence in the southwest region is gradually increasing.
Continue to develop international business and enhance brand influence. In H1 in '23, the company's US HRC business recovered, revenue +21% year on year, profit increased by more than 200% year on year. The construction of new clinics and doctor recruitment were carried out steadily, increasing production capacity and doctor reserves for international business recovery. The Hong Kong side promoted the Greater Bay Area strategy. In '23, H1, the two clinics actively promoted 'egg freezing' medical services. The number of eggs frozen was +76%, and the revenue was +16%. In addition, the company's business is also expanding to Southeast Asia. Jinrui Medical Center, which was established in Laos in March 2020, was put into trial operation in August 2023.
The level of scientific research continues to improve, and the quality of clinical research is being improved. In '23, H1, the company's hospitals have published 20 SCI journal papers, 8 core journal papers, obtained 19 scientific research projects at the municipal level and above, and obtained 2 invention patents and 3 utility model patents.
At the same time, the company cooperated with many well-known universities to further deepen the level of scientific research. In '23, Sichuan Jinxin Xicheng Hospital (Bisheng Campus) cooperated with the Chinese University of Hong Kong to provide assisted reproductive medicine and management training courses; Shenzhen Zhongshan Hospital cooperated with Guangdong Pharmaceutical University to provide joint training facilities for graduate students.
Profit Forecasts, Valuations, and Ratings
The assisted reproduction industry has vast space and great potential to increase penetration. As a leader in the industry, the company can be expected to continue to recover its business. Net profit for 23-25 is estimated to be 384/5.16/697 million yuan, up 217%, 34%, and 35% year-on-year. EPS is 0.14/0.19/0.26 yuan respectively, and the corresponding PE price is 28/21/15 times, maintaining the “buy” rating.
Risk warning
Policy risks; M&A integration falls short of expected risks; overseas expansion falls short of expected risks; increased industry penetration falls short of expected risks; risk of medical accidents.