occurrences
On November 24, 2023, the company announced FY2024 interim results. From April 1, 2023 to September 30, 2023, the company achieved operating income of HK$718 million (+7.5%), net profit of HK$166 million (+10.4%), adjusted net profit of HK$166 million (+27.1%), and earnings per share of HK$0.13 (+9.1%).
Comment:
The performance is in line with expectations, and the profitability of leading medical and aesthetic companies in Hong Kong is strong
The company's FY2024H1 performance grew steadily, in line with our expectations. Net profit achieved a year-on-year growth rate of 10.4% to HK$166 million. After excluding subsidies related to the one-time government employment protection plan during the FY2023H1 period, adjusted net profit increased 27.1% year-on-year, demonstrating strong profitability after the pandemic, and performance growth can be expected in the future. The company paid a dividend of HK$0.14 per share in the first half of the fiscal year, with a dividend ratio of 108%. The dividend payout ratio exceeded 100% for nine consecutive years, demonstrating the company's business philosophy of sharing development results with shareholders.
Healthcare & medical beauty have blossomed a lot. Looking at the average customer consumption health growth by sector, FY2024H1's medical and aesthetic services contributed 80.7% of the sales contract amount, an increase of 4.0 pct from 76.7% in the same period last year, and the core business continued to strengthen. In terms of average customer consumption, the company's average customer expenditure increased to HK$27,500 during the reporting period, achieving a significant increase of +16.1% over the previous year. Among them, the average consumption of medical beauty customers was HK$27,188 (+10.6%); the non-medical beauty business, which accounted for less than 20% of sales contracts, also increased to HK$15,554 (+14.0%), mainly benefiting from the strong consumption growth momentum brought about by the easing of the epidemic in Hong Kong and mainland China in early 2023, and the company's high customer loyalty.
Seizing the opportunities in the Hong Kong market, the “community store” model has achieved remarkable results. The company is deeply involved in the Hong Kong market, actively adapting to the trend of changing consumption habits of local customers after the pandemic, and opened its first shopping mall community store in Tsuen Wan in June 2023, which was warmly welcomed by consumers. The sales contract revenue for the first 20 business days exceeded HK$4 million, and reservations quickly filled up. According to the company's public announcement plan, the company will set up 10 additional “medical+beauty” service centers in Hong Kong within FY2024 to meet the demand for high-quality services from beauty seekers. Considering the enthusiastic response of medical and aesthetic consumers to community beauty stores and the company's high brand recognition in Hong Kong, we are optimistic that the future community store model in Hong Kong will contribute long-term growth to the company's business.
Epitaxial growth drives development, and sufficient capital supports market expansion
The company announced a major cooperation project with Goku SPA. The two parties plan to establish a joint venture with a shareholding ratio of 51:49. It is expected to establish about 60 new stores in Hong Kong and mainland China over the next three years, with a target revenue contribution of over HK$1.2 billion over the next three years. Goku SPA is a well-known “deep sleep” deep head massage parlor with a history of 15 years in Japan. It is loved by local consumers, and reservations on its Japanese official website have been scheduled until 6 months later. The first Hong Kong store will open around the Spring Festival. Given that Hong Kong and the mainland have a huge target population and the company's excellent management capabilities, we believe this cooperation can further improve the company's full-cycle service system, help increase customer stickiness and cross-sales, and is expected to become a new engine for the company's business growth.
Investment advice: Maintaining a “buy” rating
The company is one of the largest one-stop “medical health+medical beauty” service providers in the Greater Bay Area. The development strategy is clear. It explores business growth potential through the “medical aesthetic+medical” dual-core business development model, upgrades the service network, and establishes a leading position in the medical, aesthetic and health industry in the Greater Bay Area. We are optimistic about the company's competitiveness in the medical and aesthetic market and its business strength in overseas expansion. We expect FY2024-2026 to achieve operating income of HK$16.75/20.06/2,387 billion, an increase of 21%/20%/19% over the previous year, and achieve net profit of HK$4.03/4.94/606 million, an increase of 28%/23%/23% over the previous year, maintaining an “increased holding” rating.
Risk warning
Acquired hospital operations fell short of expectations, newly built hospitals fell short of expectations; orders for smart meters fell short of expectations.