Investment highlight
For the first time, China Resources Medical (01515) gave an outperform industry rating, with a target price of HK $6.99, corresponding to a valuation multiple of 11.6 times for 2023. The reasons are as follows:
China Resources Medical: the industrial model is mature, and the proportion of self-owned hospital business is increasing. The company and its controlling shareholder, China Resources Health, are the medical pioneers and leading enterprises of the central enterprises. as of December 2022, the company has a total of 116hospitals and 11115 beds, forming a regional leading hospital group such as WISCO General Hospital and Huaikuang General Hospital, as well as establishing a dominant group of cardiovascular, oncology, digestion, rehabilitation, brain, emergency and other disciplines. In 2022, the company's own hospital medical business accounted for 81% of revenue (compared with 2020 + 21ppt), and 78% of profit contribution (compared with 2020 + 26ppt).
Industry: favorable policies help the medical development of state-owned enterprises. It is clearly pointed out in the 14th five-year Plan that people's demand for a high level of medical services is more urgent, and the future development of medical services will show a diversified, multi-level and multi-faceted trend. In November 2022, 13 ministries and commissions, including the State-owned assets Supervision and Administration Commission, issued the work Plan for supporting the High-quality Development of Medical institutions run by State-owned Enterprises, making it clear that medical institutions run by state-owned enterprises are an important part of China's medical and health service system. we believe that this policy will help state-owned medical groups to become better and stronger and develop sustainably.
The self-owned hospital business is reshaped, and the extension M & An is further increased to create the brand effect of China Resources. 1) self-owned hospital: the medical business income of the company's own hospital is 6.76 billion yuan in 2022, and the CAGR is 30.2% in 2020-2022. After the strategic reshaping in 2022, the company has upgraded into a "1x" model of sustainable development by focusing on the development of discipline construction. 2) extension M & A: the company adopts the mode of "M & A-integration-injection". At present, the company has accumulated rich experience in cooperation with state-owned enterprises, such as the successful completion of the acquisition of Liaojian and Jiangneng in the first half of the year. In the future, the company plans to continue to find suitable targets and further enhance the synergy of resources by building a collectivized unified management model.
What is the biggest difference between us and the market? We believe that in history, the company's integration of its hospitals has shown its good hospital management ability; the company's continuous strengthening of discipline construction is expected to further deepen the moat.
Potential catalysts: the improvement of endogenous operation of self-owned hospitals is better than expected; the progress of M & An integration is accelerated.
Profit forecast and valuation
We estimate that the EPS of the company in 2023-24 is 0.54 yuan and 0.59 yuan respectively. The current price corresponding to the current price in 2023-24 is 7.6 times higher than that of 8.6 pm in 2004. For the first time, we cover China Resources Medical and give it an "outperform industry" rating, with a target price of HK $6.99, which is 34.4% higher than the current share price.
Risk
The operation of its own hospital is not as expected, sudden medical accidents, policy changes, extension mergers and acquisitions are not as expected, impairment of goodwill, exchange losses.