The company accelerated low-strategic collaborative business adjustments in the first half of the year, and the revenue volume was adjusted. However, benefiting from cost reduction and efficiency measures, the profit side achieved a sharp reduction in losses. The company's F-side and B-side core business indicators have grown rapidly, and there is still plenty of room for improvement in the number of paying users compared to Ping An Group's commercial insurance, enterprise, and individual customer resources. As an important component of Ping An Group's managed medical model, since the deepening of Strategy 2.0, the company has focused on F-end and B-side channels with high payment intentions and broad room for growth, and built an online and offline integrated service platform. The business model has been gradually explored and clarified, and the performance side is expected to gradually improve. Maintain a “buy” rating.

Matters: The company released its 2023 annual report. In the first half of the year, it achieved revenue of 2,222 million yuan, a year-on-year decrease of 21.5%, a year-on-year decrease of 715 million yuan, a year-on-year decrease of 4.8%, net profit of -245 million yuan, and a year-on-year narrowing loss of 47.2%.

Continued cost reduction and efficiency, further improving profitability. The company focuses on Ping An Group's comprehensive financial customers and corporate customers, upgrades products and services, establishes a member product system, and expands the online and offline healthcare service network.

The company accelerated low-strategic collaborative business adjustments in the first half of the year, and some businesses moved from a self-operated model to a platform model, and the overall revenue scale was adjusted. Specifically, the company's medical service revenue for the first half of the year was 1,034 million yuan, a year-on-year decrease of 8.9%; health service revenue was 1,189 million yuan, a year-on-year decrease of 29.9%. However, thanks to the optimization of the business structure, the company's gross margin level has increased significantly, with a year-on-year increase of 5.6 pcts to 32.2%. The company optimized resource allocation, further reduced costs and increased efficiency, drastically reduced cost investment, and achieved a significant reduction in losses. Specifically, the company's sales and marketing expenses for the first half of the year were 450 million yuan, a year-on-year decrease of 16.6%, and management expenses were 757 million yuan, a year-on-year decrease of 15.3%.

The F-side in-depth scenario collaborates with the Group to achieve differentiated service provision. The company provides online and offline one-stop healthcare management services for comprehensive financial users such as life insurance, industrial insurance, health insurance, and banks of Ping An Group. It helps Ping An Group enhance the customer experience through models such as product collaboration, equity procurement, and value-added services. In the first half of the year, the F-side strategic business achieved revenue of 1,078 billion yuan, an increase of 12.6% over the previous year; as of 2023H1, the number of LTM paying users of the company exceeded 45 million, of which the number of F-side LTM paying users was 38.1 million, an increase of 13.3% over the previous year. Compared with the end of the previous year, the number of F-side paying users had a penetration rate of only 16.6% among Ping An Group's 229 million personal financial users. In the future, as the company continues to strengthen collaborative development of comprehensive financial business with Ping An Group and explore the Group's commercial insurance customer base resources, the user base is expected to expand further and user stickiness will continue to increase.

B-side strengthens market share and breaks through the enterprise employee health management market. The company provides enterprise customers with professional employee health management solutions, forms two major service modules, physical examination+ and healthmanagement+, and creates a differentiated product service matrix. The B-side strategic business achieved revenue of 449 million yuan in the first half of the year, an increase of 88.9% over the previous year; as of 2023H1, the number of B-side LTM paying users was 3.9 million, an increase of 90.2% over the previous year, and an increase of 32.4% compared to the end of the previous year. The cumulative number of enterprise customers served increased to 1,198, an increase of 22.5% over the end of the previous year. In the first half of the year, the company's stock of large-scale enterprise customers reached nearly 90%, and the enterprise customer penetration rate in Ping An Group's medical ecosystem was only 2.2%. In the future, with the company further improving the supply of products and services, strengthening channel and public business collaboration with Ping An Group, there is broad room for growth on the corporate health management track.

Risk factors: the risk of repeated local epidemics or the deepening of the company's strategy 2.0 falling short of expectations; risk of improving management efficiency or falling short of expectations; risk of loss improvement or falling short of expectations.

Profit forecast, valuation and rating: Considering that the company is accelerating the contraction of its low-strategic collaborative business and that some business revenue is confirmed to be shifting from a self-operated model to a platform model, we adjusted the company's revenue forecast for 2023-24 to 4847/5.521 billion yuan (the original forecast was 71.55/8.395 billion yuan), adding an additional revenue forecast of 6.237 billion yuan for 2025. Considering that the deepening of the company's strategy 2.0 is in progress, overall performance improvements and profits will still need to be achieved over a certain period of time. Maintaining the “buy” rating will not be given, and no target price will be given yet.