Incident: The company recently released its report for the third quarter of 2023. Revenue for the first three quarters increased 15.0% year on year, and profit increased 5.7% year on year.
Healthcare business:
1) Revenue and profit are growing steadily, and the healthcare sector continues to improve. As disclosed in the interim report, the company's healthcare business and financial business revenue reached 3.646 billion yuan and 2,988 billion yuan respectively, up 33.8% and 0.02% year-on-year, and the share of healthcare services increased 7.29% to 54.96%. The number of emergency patients, medical examinations, and total number of discharges increased by 16.5%, 13.3%, and 19.3%, respectively, in the first three quarters.
2) Promote multiple acquisitions and investments to improve the layout of the medical system. In the third quarter, the specialist side completed the merger and acquisition of Bistar Nephrology Specialist Hospital and Haiyang Senzhikang Hospital. In October, the company acquired Kaisxuanda, a leading third-party medical equipment maintenance company, to further enhance the company's competitiveness in the full-cycle equipment management business. According to the company's December announcement, the company plans to acquire targets such as Changzheng Hospital to further integrate resources from medical institutions and speed up the layout of specialists such as nephrology, dentistry, and traditional Chinese medicine in primary medical institutions, which is expected to achieve both connotative development and epitaxial expansion.
Financial business:
As a “ballast stone” for the company's continuous development, the first three quarters were affected by US interest rate hikes and geopolitical uncertainty, and global economic uncertainty. Net interest spreads and net interest spreads declined slightly due to overseas financing costs; the company prioritized risk management and optimized the financing structure to achieve steady asset quality. Global Leasing, a wholly-owned subsidiary, issued a total of 3.5 billion yuan in medium-term notes 7 times in 21-23.
In summary, as people's demand for a healthy lifestyle rises after the epidemic, the healthcare sector will be in a period of significant growth. With policy support, steady fundamentals and high growth in the industry sector will help the company continue to develop high-quality and high-kinetic energy. We expect the company's EPS in 2023-2025 to be 1.03/1.19/1.34 yuan respectively, corresponding to PE 3.90x/3.38x/3.01x. The first coverage was given an “plus” rating.
Risk warning: Uncertainty in the domestic and international economic environment; geopolitical challenges; tightening of medical industry regulations, etc.