Brief performance review

On March 26, 2024, the company announced its annual results for the year 23. The company achieved revenue of 4,077 billion yuan (+28% YoY) in 2023, excluding the one-time impact of nucleic acid testing; net profit of 685 million yuan (+42% YoY), net profit +64% YoY after excluding the one-time impact of nucleic acid testing; adjusted net profit of 713 million yuan (+18% YoY), adjusted net profit +31% YoY after excluding the one-time impact of nucleic acid testing; when broken down, 2023H2 achieved revenue of 2,317 million yuan (YoY +39%) and net profit of 350 million yuan (YoY +38% YoY) ), adjusted net profit of 367 million yuan (+20% YoY).

Management analysis

The hospital business grew healthily, and the characteristics of oncology were further enhanced. In 2023, the company's hospital business achieved revenue of 3.89 billion yuan (+29% YoY), +35% YoY after excluding the one-time impact of nucleic acid testing. Among them, outpatient revenue was 1,351 billion yuan (+23% YoY), +43% YoY after excluding the one-time impact of nucleic acid testing; inpatient business revenue was 2,539 billion yuan (+32% YoY). The high increase in inpatient business revenue was mainly due to the company's hospitals actively expanding diagnosis and treatment programs (especially oncology projects). In 2023, the company's oncology business achieved revenue of 1,778 billion yuan (+24% year over year), and its steady growth further highlighted the company's oncology related business characteristics.

Self-built mergers and acquisitions continue to advance, and the business layout is expanding steadily. By the end of '23, the company managed or operated 15 hospitals (an increase of 3 over year) with oncology as the core. At the same time, the company continues to expand its medical service network and business scale through mergers and acquisitions+self-construction. 1) Progress of hospitals under construction: Dezhou Haijia Hospital passed the inspection in March 24 and plans to set up 1,000 beds; Wuxi Haijia Hospital is expected to be put into use in early 2025, and Changshu Haijia Hospital is expected to be put into use by the end of 2025. 2) Existing hospital phase II projects: Chongqing Haijia, Danxian Haijia, and Chengwu Haijia have already been put into operation, and projects such as Kaiyuan Hospital, Hezhou Guangji Hospital, and Chang'an Hospital are being carried out in an orderly manner. 3) Merger and acquisition project progress: In '23, the company acquired Yixing Haijia, Xi'an Chang'an Hospital, and Qufu Chengdong Hospital respectively.

Profit Forecasts, Valuations, and Ratings

With endogenous epitaxial two-wheel drive, the company's performance can be expected to grow. Considering that hospitals under construction still require continuous investment, we lowered our 24-25 profit forecast. The net profit forecast for 24-25 was 9.86/1,247 million yuan. The net profit for 2024-2026 is currently estimated to be 906/11.42/1,382 billion yuan, respectively, up 33%/26%/21% year-on-year, EPS is 1.44/1.81/2.19 yuan respectively, and PE is 17/13/11 times the current price, respectively, maintaining the “buy” rating.

Risk warning

M&A expansion falls short of expectations; industry competition increases risk; health insurance policy risk; medical malpractice risk.