This year, digital healthcare has developed into an important industrial upgrade and economic growth point in the AI wave. For the entire healthcare industry, this is not only a technological revolution, but also an innovation in business models.
In the author's view, while injecting new vitality into China's healthcare system, this also provides investors with a new opportunity to observe and invest in promising digital healthcare enterprises.
Judging from the latest developments in the market, the author noticed that Neusoft Xikang (9686.HK), a pioneer in the domestic digital medical services market, began an offering on the Hong Kong Stock Exchange on September 18. The offer price range is HK$4.76 to HK$5.91. The prospectus period is from September 18 to September 21, and is expected to be listed on September 28.
As can be seen, Neusoft Xikang not only has the long-term support of Neusoft Group, a major shareholder in the medical informatization field, but also has top investment bank CICC as the exclusive sponsor. Both aspects directly reflect the capital's favor for Neusoft Xikang, and also bring expectations to the market's subsequent performance after listing. Following the wave of AI, we might as well take this opportunity to further explore the intrinsic value behind the company and subsequent long-term investment opportunities.
The 100-billion-level digital medical market satisfies the characteristics of a “good track”
Today, the basic prerequisites for many investors to choose their favorite investment targets are a good track, a good company, and a good price. These three elements are interlinked and indispensable. Simply put, a good track can guide you on the right investment path, a good company can put you ahead of others on this path, and a good price allows you to reap higher profits with less risk at the right time.
Following this principle, to evaluate the value of Neusoft Xikang, we first need to understand the development potential of the company's industry.
On the one hand, the digital transformation of global healthcare has become the general trend. China's digital healthcare industry has also benefited from favorable policies, and market confidence continues to be boosted.
For example, a series of policies such as “Opinions on Promoting the Development of “Internet+Healthcare”, “14th Five-Year Plan”, “Opinions on Further Improving the Healthcare Service System”, and “Key Tasks for Deepening the Reform of the Medical and Health System in the Second Half of 2023” have been introduced successively, all of which are accelerating the application of the Internet, artificial intelligence, cloud computing, and big data in the healthcare field.
On the other hand, policies andDevelopment of innovative technologies such as big data and artificial intelligencedrivingThe digital healthcare industry is developing at an accelerated pace, bringing the market into a stage of rapid development.
According to the “2023-2027 Blue Book on the Economic Development of the Global Digital Healthcare Industry” published by the Forward-looking Industry Research Institute, it is estimated that by 2030, the market size of China's digital healthcare industry is expected to reach about 78.8 billion US dollars, about 574.5 billion yuan, with a compound annual growth rate of 24% from 2022 to 2030.
Source: “2023-2027 Blue Book on the Economic Development of the Global Digital Healthcare Industry”
Furthermore, it is worth noting that there is still a lot of room for improvement in the penetration rate of digital healthcare in China. For example, the penetration rates for scenarios such as remote consultation, online drug purchase, and disease management were only 21%, 31%, and 8%, respectively, all at a low level. This means that the development of the entire digital medical circuit is far from reaching the ceiling, and the huge domestic consumer base is expected to continue to drive the industry to maintain rapid growth in the future.
It is easy to judge that the resonance between policies and demand will continue to drive the penetration rate of digital healthcare in China. The industry has broad development space and good growth certainty. Digital healthcare companies such as Neusoft Xikang certainly have great potential for growth.
The business model activates endogenous motivation in multiple dimensions, and performance continuously verifies growth
From top to bottom, the focus was on Neusoft Xikang. What is its texture? We can discuss it from the two aspects of business model and performance verification.
First, Neusoft Xikang's unique business model has established its leading market position.
According to reports, Neusoft Xikang has created China's first cloud hospital platform with a city as the entrance, established a cloud hospital network closely linking local governments, medical institutions, patients, and insurance companies to achieve fair access to medical resources and efficient delivery of medical services based on the strategy of “being dominated by the government and regionalization, combining online and offline with the inside and outside of the hospital” strategy.
Simply put, through the collaborative empowerment of the four business lines of cloud hospital platform services, internet medical services, health management services, and intelligent healthcare products, Neusoft Xikang can meet the needs of medical services within and outside the hospital in all aspects. This model not only gave the company a priority position in the market, but also played a positive role in its steady development.
According to Frost & Sullivan's data, as of March 31, 2023, Neusoft Xikang's city-based cloud hospital platform has grown to 29, and the number of hospitals connected to the company's cloud hospital network has reached 2,500.IfBased on the number of cities covered, Neusoft XikangIt has becomeChina's largest cloud hospital network.
Based on this, in an environment where the industry is growing rapidly, Neusoft Xikang will have the opportunity to form a virtuous cycle of self-strengthening through economies of scale and wheel effects, gain more market share and resources, and continue to achieve high growth, thus standing at the forefront of the industry.
Source: Company Information
Second, the steady increase in revenue means Neusoft's business model is constantly being tested by the market.
According to the prospectus, the company's revenue increased from 503 million yuan in 2020 to 687 million yuan in 2022, with a compound annual growth rate of 16.87%, and 82.69 million yuan in the first quarter of 2023; gross profit increased from 134 million yuan in 2020 to 168 million yuan in 2022, with a compound annual growth rate of 11.97%, and 22.533 million yuan in the first quarter of 2023.
Data source: prospectus
Behind the improved performance, in addition to the growth of its own business, one very important point is that Neusoft and Heekang continue to control internal operating costs.It can be clearly seen that the company's sales and marketing expenses, R&D expenses, and administrative expenses are all showing a downward trend, achieving cost reduction and efficiency.
Data source: prospectus
Overall, good financial levels and unleashed profitability are gradually demonstrating the correctness and development potential of the company's business model. As the company continues to innovate and optimize according to the market environment and competitive pattern, its business model will also become more mature and stable, achieving better profits and growth.
Issuance valuationHavestrengths,Long-term value growth can be expected
Finally, back to the market level, the author believes that now may be an appropriate time to focus on Neusoft Xikang, mainly due to the following two points:
The first is that Neusoft Xikang's distribution valuation has an advantage.
If you calculate the highest issue price of HK$5.91, Neusoft Xikang's market value is about HK$7 billion. Compared with leading digital healthcare companies that are already listed on Hong Kong stocks, the valuation is attractive.
According to Choice data, according to the closing price of September 18, the market value of JD Health (6618.HK) is about HK$13.8 billion, the market value of Ali Health (0241.HK) is about HK$61.8 billion, and the market value of Dr. Ping An (1833.HK) is about HK$20.6 billion, which means that the market recognizes the digital health circuit and high-quality enterprises. With the company officially entering the Hong Kong Stock Exchange, it is expected that it will continue to unleash potential for valuation improvement based on its own advantages and position in the industry.
Second, the medical sector of the Hong Kong stock market is in the low valuation range, and the margin of safety is high.
Recently, the healthcare sector of the Hong Kong stock market has continued to fluctuate due to various macro factors. Market sentiment is relatively sluggish, and sector valuations are at a historically low level.
Data source: Chioce
The author believes that as expectations that the US interest rate hike will end increase, capital is expected to return. At the same time, with the introduction of a combination of economic stimulus policies, related valuation suppression factors are expected to be mitigated and market bias may be repaired. If Neusoft and Xikang can continue to obtain data verification at the performance level, it is expected that a round of value growth opportunities will be ushered in.
epilogue
As the saying goes, we have to follow the trend in doing things. This statement is also particularly pertinent in the field of digital medicine at this point in time. On the one hand, the digital healthcare field has steady growth attributes brought about by an aging population, and on the other hand, it also has high growth attributes brought about by the empowerment of innovative technologies such as AI, etc., all of which clearly indicate the certainty and importance of the future development of the industry. Being able to find opportunities under this major trend is tantamount to seizing opportunities in the field of digital healthcare.
As mentioned earlier, the track where Neusoft Xikang is located and its own qualifications are in line with the characteristics of “good track, good company, and good price.” What is reflected behind it is its development strategy based on industry development and market changes, which has shown the competitiveness it should have in the digital healthcare industry.
At the same time, judging from Neusoft Xikang's current listing for fund-raising purposes, the company will continue to expand the City-based Cloud Hospital platform, provide richer and more professional healthcare services, and strengthen the platform's technical infrastructure to enhance data processing and security capabilities. These measures can enhance its existing service capabilities in multiple dimensions, meet the diverse needs of patients, and further strengthen the company's market position and core competitiveness.
Predictably, with Neusoft Xikang officially listed on the Hong Kong Stock Exchange, it is likely to release more energy under the impetus of capital. As for its subsequent performance, we may be able to open up more investment imagination.