Revenue will grow steadily in 2023, and I am optimistic that it will continue to climb steadily at home and abroad in 24 years
Jinxin Fertility achieved revenue of 2.79 billion yuan (+18.0% yoy) in 2023, net profit to mother of 345 million yuan (+184.6% yoy), and adjusted net profit of 471 million yuan (+72.0% yoy). The steady increase in revenue was mainly due to the overall recovery period of 23 years, and benefited from steady growth in Chengdu & the Greater Bay Area and the climbing slope of incubation (Yunnan/Wuhan) & overseas institutions (US & Laos) (total number of egg retrieval cycles reached 30,000, +16.2% yoy).
Looking ahead to 2024, considering Chengdu's third-generation business growth and continued overseas development (HRC and Southeast Asia), we forecast that the adjusted EPS for 2024-2026 will be 0.20/0.23/0.28 yuan, and that the company will be given 20 times PE in 24 years (20 times consistent with its Hong Kong stock comparable company's 24-year Wind forecast average), with a target price of HK$4.35 to maintain a “purchase”.
Mature institutions: Chengdu has benefited from the implementation of three generations of licenses. Shenzhen is optimistic about the double-digit revenue growth of old hospitals+the new hospital's investment in the Chengdu region to achieve revenue of 1.47 billion yuan in 2023 (+6.2% yoy, including ARS business revenue +15.7% yoy), benefiting from the increase in the number of IVF cycles in Xinan/ increased penetration rate of special needs services + stabilizing demand for women and children's hospitals. Looking ahead to 2024, we are optimistic that Chengdu will maintain positive growth. The main reasons are: 1) the number of high-cost IVF cycles is expected to continue to rise; and 2) the revenue share of other specialty departments (pediatrics, gynecology, traditional Chinese medicine, ophthalmology, etc.) is expected to increase (estimated 40% in 24 years). The Shenzhen region's revenue for 23 years is 410 million yuan (+16.9% yoy). We are optimistic that the old hospital will continue to grow 15% in 24 years (1Q estimates have achieved 20% revenue yoy). Furthermore, the new building is expected to open in March-June '25, and is expected to meet the needs of the Greater Bay Area when production capacity is sufficient.
Incubation agency: Fast climbing in 23 years; in addition, the company's two major incubation regions climbed strong (4261 IVF cycles in 23 years, +43% yoy), with Yunnan revenue of 236 million yuan in 2023 (+154.8% yoy, increasing equity ratio to 96.5% in July '22), turning losses into profits. Wuhan's revenue for 23 years was 0.38 million yuan (+124.6% yoy, ARS business resumed in August '22), and losses were drastically reduced. In 24, we are optimistic that the Wuhan region of Yunnan will improve its performance through clinical quality control, talent training, and operational adjustments, thereby turning losses into profits.
Overseas agencies: the gradual recovery of US business, optimistic about new business+new regional expansion space in Hong Kong/Laos, the US region will achieve revenue of 568 million yuan in 23 years (+22.7% yoy, nearly 4,000 IVF cycles). We are optimistic that the region's revenue will maintain a double-digit year-on-year increase in 24 years, mainly due to: 1) international flight ticket prices have returned to a reasonable level, and international patients are expected to fully recover; 2) Recruiting 8-10 high-quality US cooperative doctors since August '22 (currently 30 doctors in total); 3) Actively expanding new business, which is expected to achieve 1-2 within the year A new project. The Hong Kong region's revenue for 23 years was 67 million yuan (+12.3% yoy). We are optimistic that the region's revenue growth will accelerate in '24, mainly due to the rapid growth in egg freezing business volume (145% year-on-year increase in 2023). The Laos region began trial operation at 7M23 and achieved revenue of 2.761,000 yuan in 2023. The Southeast Asian market may be further developed later.
Risk warning: The acquisition expansion was unsuccessful, and the number of IVF cycles recovered less than expected.