Key points of investment
Event: Continued promotion of repurchases for equity incentives, demonstrating confidence in long-term growth.
0.96% of the total share capital has been repurchased through trusts for equity incentives. Since 22H2, the company has adopted an equity incentive plan and established an equity trust to purchase shares in the secondary market through trusts and place them in the stock pool to provide incentives to core experts.
According to the company's announcement, as of December 27, 23, the company had repurchased 2.3637 million shares under the plan, accounting for 0.96% of the total share capital. Among them, since December 12, 23, the company has used a total of HK$45.47 million (corresponding to approximately RMB 41.34 million at the current exchange rate) to repurchase a total of 961,400 shares, corresponding to an average repurchase price of about HK$47.3 per share (closing price of HK$48.95 per share on December 28, '23).
In addition to trust repurchases, the company also rewards long-term investors through cancellation. According to the company's WeChat account, since December 20 this year, the company has spent a total of HK$42.92 million and cancelled the repurchase of about 970,000 shares.
Driven by development: With the integration of medical resources as the core, accelerate national expansion and seize the dividends of the traditional Chinese medicine diagnosis and treatment industry.
1) In the short term, we will undertake high-quality medical resources through the combination punch of Tuodian+Tuocheng+Expanding Area.
According to the company's WeChat account, the company added 6 traditional Chinese medicine hospitals and the University of Traditional Chinese Medicine medical consortium cooperation this year. The number of medical consortium cooperating units across the country reached more than 20, and continued to integrate high-quality medical resources. 23H1 had more than 30,000 online and offline physicians, and the proportion of physicians with deputy directors and above continued to increase. In the context of continuing to advance the integration of medical resources, the company is also accelerating the national expansion process through the Tuodian+Tuocheng+Area Expansion combo to undertake high-quality medical resources. Through self-construction and acquisitions this year, the company added 7 new institutions located in Kunshan, Wuxi, Wuhan, Foshan, Shanghai, and Fujian. Among them, Wuhan and Kunshan are all new cities.
2) In the medium to long term, the countercyclical nature of traditional Chinese medicine diagnosis and treatment is prominent. The company's penetration rate is still low, taking advantage of the industry's rapid expansion.
We believe that the low penetration+rising demand for traditional Chinese medicine diagnosis and treatment is expected to become one of the most noteworthy consumer medicine tracks in the next few years. On the one hand, the external environment has changed in recent years, and the public's overall health awareness has increased, and demand for diagnosis and treatment of common respiratory diseases and sub-health problems has increased; on the other hand, national policies support the development of the traditional Chinese medicine industry, which is expected to accelerate the penetration of traditional Chinese medicine diagnosis and treatment. The company's current market penetration rate is still low. It has 57 institutions across the country, and is optimistic that the future will accelerate expansion through core city encryption+ expansion of new cities.
Profit forecast: Considering that the 23H2 traditional Chinese medicine industry maintains a high level of prosperity, the countercyclical nature continues to be prominent, and the company also maintains a positive expansion trend, continues to integrate high-quality medical resources, and accelerate national expansion, we expect the company's revenue and net profit to mother will maintain a high growth rate. The company's revenue for 23-25 is expected to be 23.07, 31.41, and 4.163 billion, respectively, up 42%/36%/33%; net profit to mother will be 2.41/3.52/492 million, respectively, up 32%/46%/40%. Excluding effects such as amortization of equity incentives, etc., the adjusted net profit for 23-25 is estimated to be 2.91/398/537 million, an increase of 45%/37%/35%, corresponding to the 22-25 CAGR of 39%. Based on adjusted net profit, the current market value is 38/28/20 times PE in 23-25, respectively, maintaining a “buy” rating.
Risk warning: risk of policy changes; risk of compliance with public opinion; risk of opening up a store or falling short of expectations when a new store falls short of expectations