Results recovered rapidly in 2023, and profitability continued to improve. Maintaining a “buy” rating, the company released its 2023 annual report. In 2023, the company achieved revenue of 2,789 million yuan (+18% year over year; the following are all year-on-year caliber), adjusted net profit of 471 million yuan (+72%), gross profit margin of 42.1% (+5.17pct), and adjusted net interest rate of 16.9% (+5.31pct). Considering the high valuation of the M&A market in 2023, we lowered 2024-2025 and added a profit forecast for 2026. The net profit for 2024-2026 is estimated to be 3.87/4.63/538 million yuan (previously 498/646 million yuan). The current stock price corresponds to PE 16.1/13.47/11.58 times, considering the continued increase in the company's profitability, high barriers to industry competition, and the new Shenzhen campus is expected to open and operate, maintaining the “buy” rating.
Assisted reproductive services grew steadily, and Wuhan and Yunnan regions quickly resumed sub-business splitting. In 2023, ARS business revenue was 1,336 million yuan (+26.74%), management service fee revenue was 566 million yuan (+12.49%), supplementary medical services revenue was 209 million yuan (+38.21%), and obstetrics and gynecology and pediatric medical services revenue was 4.7 billion yuan (-0.13%). Divided by region, Chengdu's revenue was 1,471 billion yuan (+6.21%), of which ARS revenue in Chengdu was 760 million yuan (+15.7%), Shenzhen revenue was 407 million yuan (+17%), and US business revenue was 568 million yuan (+23%). The Wuhan region and Yunnan region recovered rapidly. In 2023, the Wuhan region achieved revenue of 38 million yuan (+125%), and the Yunnan region achieved revenue of 236 million yuan (+154.8%).
The number of IVF cycles continues to grow, and the success rate is steadily increasing
The number of IVF cycles in the company reached 32,000 (+15.75%) in 2023, a record high. In 2023, the company's IVF success rate in Chengdu was 57.5% (+1.4pct), the success rate in Shenzhen was 57.4% (+2.9pct), the success rate in the US region was 56.3% (-0.8pct), and the success rate in Yunnan also reached 54.8%.
Sichuan Jinxin Xinan Hospital has been qualified for PGT trial operation. The new Shenzhen hospital is expected to be put into operation in July 2023. Sichuan Jinxin Xinan Hospital (Bisheng Campus) will be qualified for PGT trial operation, enabling Sichuan Jinxin Xinan Hospital (Bisheng Campus) to provide medical services in various fields of assisted reproduction, including IUI (AIH, AID), IVF-EF, ICSI, and PGT. In 2023, two clinics in Hong Kong began actively promoting 'egg freezing' medical services, leading to a 145% increase in the number of egg freezes compared to the same period in 2022. Laos Jinrui Medical Center began trial operation in August 2023. The new campus of Shenzhen Zhongshan Hospital is expected to relocate its business in the first half of 2025.
Risk warning: risk of policy changes, risk of increased market competition, risk of excessive valuation of mergers and acquisitions in the primary market.