Matters:
Recently, the company announced its 2023 interim report. The reporting period achieved revenue of 2,222 million yuan (-21.5% year-on-year), and loss (GAAP) of 225 million yuan (loss narrowed by 47.2%) during the period.
Commentary:
The medical service system is gradually being improved. By business, 2023H1's medical service/health service business achieved revenue of 1,034/1,189 billion yuan respectively, a year-on-year decrease of 8.9/ 29.9%, a year-on-year gross margin of 42.9/ 22.9%, respectively, and a year-on-year increase of 5.9/3.4 pct. The number of paid users of the company exceeded 45 million (+11.4%) in the past 12 months, including about 38 million on the F end (+13.3%) and about 3.9 million on the B end (+90.2%). In terms of serving enterprise customers, the B-side has served a total of 1,198 enterprise customers (+22.5% over the previous year).
O2O healthcare services to strengthen supply chain management and control systems. In terms of the medical service network, the company has further integrated online and offline medical service resources, created a one-stop compliance system, and provided users with more complete and high-quality services. As of 2023H1, the company has cooperated with nearly 4,000 hospitals, 226,000 cooperative pharmacies, achieved 1-hour drug delivery in 249 cities, and launched 7*24 hour drug delivery services in 91 cities. Among them, by linking to the DTP pharmacy network, the company covers nearly 1,300 pharmacies in 26 provinces across the country to provide medical needs protection for people with oncology. In terms of the health service network, as of June 30, 2023, the company has cooperated with a total of nearly 103,000 health service providers and more than 2,000 cooperative medical examination suppliers.
Business capacity has gradually increased, and gross profit levels have steadily increased. 2023H1 achieved a gross profit margin of 32.2% (+5.6pct). During the reporting period, the company continuously optimized resource allocation and personnel structure, strengthened production control, and improved operational efficiency through informatization and digitalization, resulting in a sharp drop in cost investment. Among them, the company's sales expenses/management expenses decreased by 16.6%/15.3% year-on-year, respectively.
We are optimistic about the long-term development of the company and maintain the “recommended” rating. In view of the company's interim performance and the company's still in the Strategy 2.0 adjustment period, we adjusted the company's performance forecast. We expected revenue for 23-25 to be 58.52, 68.51 billion yuan, and 8.023 billion yuan, respectively (the previous revenue forecast values for 23 and 24 were 7.567 billion yuan and 9.138 billion yuan), compared to -5.0%, +17.1%, and +17.1%. Since operating income is an important indicator for measuring internet healthcare, we used PS for valuation, gave 4 times the target PS for 2023, corresponding target price of HK$23, and maintained the “recommended” rating.
Risk warning: The expansion of member products falls short of expectations, Internet health policy risks, etc.