Introduction to this report:
The performance is in line with expectations, mergers and acquisitions and integration capabilities continue to be verified. The second phase and new hospital projects are progressing steadily, and the number of beds continues to expand. It is expected that steady and rapid growth will continue and maintain the rating of increasing holdings.
Summary:
The performance was in line with expectations, and the rating for increasing holdings was maintained. In 2023, the company achieved operating income of 4,077 billion yuan (+27.6%, +34.0% after excluding nucleic acid testing), net profit of 685 million yuan (+42.1% after excluding nucleic acid testing), adjusted net profit of 713 million yuan (+17.5%, +31.1% after excluding nucleic acid testing), and net operating cash flow of 783 million yuan (+14.2%), which is in line with expectations. The company's revenue for January-January 2024 increased by more than 40% year on year. Considering the company's production capacity release pace in Chongqing, Shanxian Phase II, and newly built hospitals, Yixing Haijia and Chang'an Hospital's acquisition and merger contributed, the adjusted net profit forecast for 2024-2025 was lowered to 9.32/1,158 billion yuan (originally 1,080/1,351 billion yuan). The adjusted net profit forecast for 2026 was 1,428 billion yuan, up 31%, 24%, and 23% year-on-year. Refer to comparable company valuations and give 2024 PE 25X with a target market value of 100 million yuan The yuan corresponds to the target price of 36.58 yuan (HK$39.61; the exchange rate is RMB: HKD = 1:1.08), maintaining an increase in holdings rating.
Tumor characteristics were further enhanced. In 2023, hospital business revenue was 3.90 billion yuan (+35.4% after excluding nucleic acid testing), outpatient revenue of 1.35 billion yuan (+43.2% after excluding nucleic acid testing), and inpatient revenue of 2.54 billion yuan (+31.6% after excluding nucleic acid testing). Oncology MDT construction continues to be strengthened, with 83,800 surgeries (+34.6%), and oncology-related business revenue of 1.78 billion yuan (+23.6%), accounting for 43.6% of total revenue.
M&A integration capabilities are continuously verified, and expansion is progressing steadily. The company continues to expand the breadth and depth of the hospital network. As of March 2024, there are 16 hospitals in operation, including 4 tertiary general hospitals. The industry's ability to integrate continues to be verified. Yixing Haijia Hospital's revenue during the consolidation period was +30.8%, and Chang'an Hospital's revenue was +28.9% year-on-year during the consolidation period. Chongqing Haijia Phase II 1000 cards were put into operation in February 23, and the second phase of Haijia in Shanxian County was put into operation in July 23. Other projects under construction include 350 copies of Wuhaijia Phase II (commissioned in January 24), 1000 copies of Hejia in Dezhou (approved by level-III hospitals in March 24), and 1200 Haijia cards in Changshu (expected to be delivered by the end of 25). The second phase of the Kaiyuan, Hezhou, and Yongding projects are progressing steadily. The company's expansion plan is standardized, predictable, and sustainable. By the end of '23, it will open about 9,600 beds, and is expected to reach 14,000+ by the end of '25. Steady and continuous growth can be expected as the number of beds and single bed output increases.
Catalysts: Phase II production capacity release, epitaxial merger and acquisition expansion project implementation risk warning: self-built hospitals and epitaxial expansion progress falling short of expectations; policy risks