With the completion of asset restructuring, the medical service group set sail again.

The listed company, formerly known as Hengkang Medical, entered the medical service industry by means of highly leveraged and high premium acquisitions, which led to crises such as impairment of goodwill and debt thunderstorms. In August 2020, creditors of listed companies applied to the court for bankruptcy reorganization. The restructuring plan led by New mileage Health, a leading domestic medical and health industry group, was completed in June 2022. As an industrial investor, financial investors such as United Heyin Investment (Beijing Broadcasting Group), Dahe Rongzhi (Beijing Zhongguancun Mother Fund), Shenzhen Tongzhikang (Minmetals Jintong), Minmetals Jintong (No. 1 fund managed by Minmetals) and Chengdu Zhenxing Jiaye (Sichuan Zhenxing Group) were completed. By jointly investing 1.79 billion yuan in the form of transferred capital reserve to increase equity to participate in the restructuring of the listed company, Xinli healthily became the company's new controlling shareholder, with a shareholding ratio of 25.30%. In August 2022, the listed company changed its name to New mileage. At present, listed companies are issuing shares to specific targets (new mileage health). After completion, the proportion of shares held by new mileage health will be further increased to 29%.

After the completion of this restructuring, the debt crisis of listed companies has been properly resolved, their performance has bottomed out, various financial indicators have developed for the better, and fundamentals have been reversed.

Listed companies operate in dual main businesses, dominated by medical service assets.

Before and after the bankruptcy and reorganization of listed companies, the main business structure has not changed, and the industrial layout of "medical service + pharmaceutical industry" is still maintained: (1) in terms of medical services, the company controls a total of 11 hospitals, including 3 third-level hospitals and 7 second-level or above general hospitals or specialist hospitals. Wafangdian third Hospital, Xuyi County traditional Chinese Medicine Hospital, Siyang Hospital, Lankao first Hospital and Chongzhou second Hospital have initially formed regional (county) medical centers. Ganxi Hospital and Jiangxi Western Cancer Hospital are the top local medical institutions. According to the mid-2023 report, 800 beds in the new hospital district of Siyang Hospital will be officially opened at the end of 2022, and the new oncology building of Xuyi County traditional Chinese Medicine Hospital has begun construction, with an estimated addition of 600 beds. The new hospital district of Chongzhou second Hospital is built in accordance with the standards of third-class and first-class hospitals, and is expected to be put into use in October 2023, and medical institutions in listed companies still have the potential for further expansion. (2) in the pharmaceutical industry, the company relies on the Longnan traditional Chinese medicine market and focuses on the "unique" series of proprietary Chinese medicine products, with 36 varieties, such as Duwei capsule, Shenqi Schisandra tablet, Maiping tablet, Qianlie Antong tablet, Gongliuning capsule, and so on. After the completion of the restructuring, the new mileage Health will increase the capital of Duwei Pharmaceutical by 350 million yuan. Mainly used for capacity expansion, construction of traditional Chinese medicine industrial park, layout of daily chemical products, acquisition of other traditional Chinese medicine enterprises, etc., unique pharmaceutical is expected to gradually form a more competitive product matrix, the company's development has entered a new period.

Extracorporeal hospitals are rich, and shareholders plan to gradually inject high-quality assets into listed companies.

New mileage Health is the leading medical and health industry group in China. Before this restructuring transaction, it already owned professional medical groups such as New mileage Medical Group, Hongci Medical Group, Chongqing Jinpu Medical Group and Huayou Medical Group. In 20 provinces and cities across the country, it controls and manages more than 30 first-class hospitals and 200 primary health care institutions, with a total number of more than 20,000 beds. Among them, New mileage Health is a hospital group directly acquired or nurtured by New mileage Health. Hongci Medical Group, Chongqing Jinpu Medical and Huayou Medical are professional medical platforms for further acquisition and integration of New mileage Health.

According to the restructuring plan and the record of Investor activity Relations, New mileage Health will inject its controlled high-quality medical assets into listed companies through self-raising funds, M & A funds, M & A loans and stock issuance within five years, so as to solve the problem of inter-industry competition with listed companies and make listed companies become leading medical and health groups in the industry.

Investment advice: if asset injection is not taken into account, we expect the company's operating income from 2023 to 2025 to be 3.526 billion yuan, 4.068 billion yuan and 4.831 billion yuan respectively, with year-on-year growth of 11.9%, 15.4% and 18.8% respectively. The net profit of homing in 2023-2025 was 192 million yuan, 275 million yuan and 409 million yuan, respectively, and the year-on-year growth was 26.1%, 43.3% and 48.6%, respectively. If the asset injection is considered and the segment valuation method is adopted, we add up the internal asset valuation and the external asset valuation, and the total valuation is 17.5 billion yuan. With reference to the current 3.382 billion equity shares, the corresponding target price is 5.17 yuan per share. For the first time, we give a Buy-An investment rating.

Risk tips: the risk of asset injection is lower than expected; the progress of the hospital expansion project is not as expected; the debt risk caused by interest rate fluctuations; medical care; medical safety accident risk; hypothetical lower-than-expected risk.