Key points of investment
Operational efficiency continues to improve, and losses have been drastically reduced. The company issued the FY2024H1 performance announcement: Due to the continued focus on the company's health management platform and solution sector product portfolio, revenue declined and gross margin increased.
FY2024H1 achieved revenue of 356 million yuan (-24.9%, same increase, same below) and a gross profit margin of 38.2% (+12.1pp). Benefiting from continuous improvements in operating efficiency, the company's losses have been drastically reduced, and profitability has increased.
FY2024H1 sales expenses, management expenses and R&D expenses were $104 million (-16.5%), $59 million (-45.7%) and $104 million (-43.0%), respectively. The cost rates were 29.1% (+2.9pp), 16.7% (-6.4pp) and 29.1% (-9.2pp), respectively; the period loss was $80 million, down 77.7% year on year; the adjusted net loss was $54 million, down 75.9% year on year.
yiDucore will be iteratively upgraded to further empower medical application scenarios. The company's self-developed language model continues to be optimized and upgraded, and yiduCore will also be iteratively upgraded to version 2.0, providing deeper empowerment for various medical application scenarios. In terms of disease research, as of FY2024H1, the YiDuCore medical knowledge map has covered more than 100,000 medical entities, covering more than 10,000 diseases; established disease models in nearly 80 disease fields; and promoted cooperation between the company and experts and authorities to publish 19 standard disease data sets, covering esophageal cancer, tuberculosis, mental illness, etc. At the level of medical natural language processing, as of FY2024H1, yiduCore has authorized the processing and analysis of more than 4 billion medical records, involving more than 900 million patients, covering more than 1,700 hospitals; it can accurately identify more than 25,000 medical semantic fields.
Deepen disease research and strengthen the closed-loop development of solutions. In the big data platform and solutions sector, FY2024H1 achieved revenue of 128 million yuan (+3.2%) and a gross profit margin of 45.2% (+3.9pp). (1) For hospitals, this section provides solutions around the three application scenarios of research, clinical diagnosis and treatment, and hospital operation management. FY2024H1 added 6 top hospital customers. In terms of commercialization of next-generation solutions, FY2024H1 has assisted one of the top three hospitals in East China to build a full-disease database platform and YiDueYwa2.0 (next-generation data center). In terms of real-world research services, in the field of hematology, FY2024H1 has won the bid for a national multi-center big data platform construction project for hematologic diseases in one of the top three hospitals in East China, with a contract amount of nearly 9 million yuan; in the field of ophthalmic diseases, the national eye disease clinical medical research center big data platform constructed by FY2024H1 has been officially released; and in other disease fields such as pediatrics and respiratory medicine, FY2024H1 has won bids for a number of tertiary and tertiary hospitals. (2) For regulators and policy makers, this section provides solutions around application scenarios such as regional platform construction, public health, and population health management. FY2024H1 added 4 new regulatory agency and policy maker clients. In terms of regional platform construction, FY2024H1 has won the bid for a medical supervision platform project in Chaoyang District, Beijing, with a contract amount of nearly 10 million yuan. In terms of public health, the company provides comprehensive solutions through large-scale simulation and prediction. As of FY2024H1, it has been verified in 25 provinces and cities; among them, FY2024H1 has helped a province in South China build an infectious disease monitoring, early warning and emergency command information platform.
Intelligent clinical core competitiveness is outstanding, and customer stickiness is high. In the life science solutions sector, FY2024H1 achieved revenue of 170 million yuan (+16.1%) and gross profit ratio of 27.8% (+13.3pp), further improving operating efficiency; the revenue retention rate of the top 10 customers was 128.2%, and customer stickiness continued to increase. This section provides solutions around clinical development, real-world research, and digital commercialization. As of FY2024H1, 296 clinical studies and 221 prospective and retrospective real-world studies have been conducted, and the intelligent service has covered 304 clinical trial institutions.
Based on an integrated intelligent service platform, clinical progress is progressing efficiently. FY2024H1 has completed TAB014 (Zhaoke Ophthalmology) phase III clinical trials and stage III patients with wet age-related macular degeneration (a biopharmaceutical company) ahead of schedule, respectively. With the highest technical score and high customer recognition, the company has successively won bids for three highly technically demanding retrospective real-world research projects related to cancer and pain from an MNC client.
The Huiminbao business is stable, and commercialization of digital diabetes therapy products can be expected. In the health management platform and solutions sector, FY2024H1 achieved revenue of 58 million yuan (-71.4%) and a gross profit margin of 53.2% (+28.1 pp), benefiting from continued focus on the product portfolio. This section focuses on providing solutions for insurance and chronic disease management services. In terms of the Huimin Insurance business, as of FY2024H1, the company has won bids and served 12 cities in 4 provinces; the company has been using the main operating platform for two consecutive years to provide full-process operation services for the Huimin Insurance business in Jiangsu, Beijing and Tianjin. Among them, Jiangsu and Beijing Huiminbao began sales for the third year in October and November 2023, respectively; in addition to covering operation services, the company also provides innovative value-added health management services. In terms of chronic disease management services, FY2024H1 incorporated diabetes digital therapy into the health management payment service of Tianjin Huiminbao for the first time; the innovative solution for diabetes digital therapy was successfully selected for the “2+3” health service package project in Hainan Province and will carry out preliminary pilot work this year; the company was successfully selected as the “Best Innovative and Practical Enterprise of the 2023 World Digital Therapy Conference” to further verify the commercialization viability of digital therapy.
Investment suggestions: The company develops its own basic model of medical treatment, and medical intelligence accelerates; with the recovery of prosperity, the life science solutions sector is expected to rebound strongly; commercialization of self-developed diabetes digital therapy products can be expected. Considering the continued focus on the product portfolio in the health management platform and solutions sector, we adjusted our original profit expectations and predicted that the company's FY2024-FY2026 revenue would be 8.88/11.60/1,574 billion yuan, a growth rate of 10%/31%/36%, and maintain the “buy-A” proposal.
Risk warning: the risk of iterative technology updates, the risk of increased competition in the medical intelligence industry, the commercialization of digital therapy products falling short of expectations, etc.