Report guide

Seize the chain's high-quality pediatric traffic portal, and the multi-track collaborative layout can be expected to increase.

Key points of investment

Pediatric medicine: There is broad scope for supply and demand resonance, and the differentiation of private institutions breaks the demand side: benefiting from the demand-side customer base plus the trend of refined childcare for new generation parents, and broad pediatric medical space. According to estimates disclosed by the New Century Medical Officer, the size of the pediatric medical services market in China can maintain a compound annual growth rate of 20% from 2016 to 2021, reaching 234 billion yuan by 2021.

Supply side: As of '21, the number of beds/pediatricians per 1,000 children in China was 2.2/0.78, which is a big gap compared to the development target of 3.17/1.12 in 2030. At the same time, the use of children's hospital beds is under high load, and the imbalance between supply and demand in the industry is obvious. In recent years, related policies such as encouraging social medical treatment and multi-point practice have been introduced frequently to encourage the development of private institutions. In the future, it is expected to complement public hospitals that position serious medical underwriting services. Currently, there is no strong leading brand in the industry, and there may be room for further integration.

Industry trends: Influenced by the characteristics of pediatric medicine itself, public healthcare consumption mentality is stable. Private institutions essentially complement public institutions in actual market competition. Their development and growth requires facing consumer trust and the pain points of their own business sustainability. We believe that differentiated positioning+diversified expansion+chain operation may be a way to break the game for private pediatrics, that is, choosing a high-dive track with strong repurchase attributes and low health insurance coverage, and focusing on exploring the multi-dimensional and full-life cycle needs of the customer base. Furthermore, on the operating side, we use online conduction to mitigate customer acquisition problems, shape consumer perception, and ultimately establish our own brand effect and achieve differentiated competition with public institutions.

Great East: Seizing the height management traffic portal, the multi-track layout has obvious advantages, and the subsidiary Junyao Medical was established in 2021 to lay out the medical care layout. Currently, it has formed two major sector layouts: specialty pediatrics (covering medical services covering the entire development cycle of children and rehabilitation for children with special needs) and general hospitals. As of 23H1, the company has operated 50 children's medical service chains (23 Jiankao Pediatrics +21 Yaen Health +6 Zhibei Medical), covering more than 30 large and medium-sized cities across the country. 23H1 medical business revenue is 1.22 billion yuan, accounting for 69%.

Customer traffic entrance+high collaborative circuit expansion+physicians' resource reserves. Each of the three major brands in the company's pediatric chain focuses on:

1) Jiankao Pediatrics: The card is a gold track for growth hormone. Naturally, it has traffic entry properties, which can strengthen the customer base for subsequent expansion. China's pediatric short stature market has a high base+low penetration. The market size is expected to reach 16% CAGR in 2018-2030, and the industry concentration is extremely high. Longyi is Jinsai Pharmaceutical, a subsidiary of Changchun Hi-Tech, with a market share of over 70%. Jiankao is positioned as Jinsai Pharmaceutical's downstream medical service platform, with annual revenue of about 1.86 billion yuan in '22, +101% over the same period, accounting for more than 80% of the company's medical business. After Dadongfang's acquisition, it is expected that it will continue to function as a growth hormone flow pool and expand high-margin specialist programs horizontally through standardization and transformation of its pre-diagnosis, in-clinical-post-diagnosis procedures.

2) Yaen Health: Strong standardization capability+strong business synergy, which is expected to empower the company to build a chain service system. The prevalence rate of autistic children in China is increasing year by year. The average annual rehabilitation cost for families with sick children exceeds 80,000 yuan. At the same time, the ratio of registered rehabilitation teachers to sick children by the Disabled Persons' Federation is as high as 1:130, and the contradiction between supply and demand is prominent. Yaen Health has 18 years of teaching experience, a perfect curriculum system and strong standardized output capabilities. As of 23H1, it has set up more than 20 service centers in 7 major cities including Beijing and Shanghai, serving 360,000+ households online and offline, with a revenue of 45 million yuan/ +361% in 2022. Research by China Medical Daily shows that 90% of children with short stature have psychological or behavioral disorders such as low self-esteem and depression of varying degrees. The customer portraits of Jian Gao and Yahen overlap, and it is expected that they will further channel traffic and strengthen business collaboration in the future.

3) Zhibei Healthcare: Attaches importance to the reserve and training of physicians, penetrates the online and offline closed-loop ecosystem, and can provide talent and ecosystem construction support for pediatric business. The founder of Zhibei is Weibo Big V and star physician Ou Xi. She has strong brand influence. The business side uses children's medical care as an entry point to expand the business to create a “child - woman - beauty” one-stop service layout; the operation side combines high-frequency online interaction with offline diagnosis and treatment to create a closed loop of medical services. Currently, it has set up 6 institutions in Guangzhou, Zhongshan, Foshan, Kunming, Shenzhen and other places, serving 100,000 people or more.

Profit forecasting and valuation

Dadongfang's strategic transformation and pediatric medical boom circuit, with high quality traffic entry for growth hormone, efficient business collaboration throughout the entire cycle of child development, the integrated layout is progressing steadily, and it is worth continuing attention. It is estimated that in 2023-25, the company's net profit to mother will be 2.0/23/280 million yuan, +13%/17%/20% year over year. The corresponding PE is 18/15/13 times. The corresponding PE under current market value is 18/15/13 times. The first coverage gave it a “buy” rating.

Risk warning

Consumption recovery fell short of expectations, industry competition intensified, new stores and new business expansion fell short of expectations, and the risk of medical accidents.