Incident: The company announced its annual results for '23, achieving annual revenue of 2,789 million yuan, up 18.0% year on year; realized net profit of 347 million yuan, up 194.2% year on year; adjusted net profit of 472 million yuan, up 72.0% year on year; performance was in line with expectations.
Comment:
Annual performance grew steadily, and the success rate of the assisted reproduction business continued to increase. By business sector, in 2023, the company's core assisted reproductive health services (ARS) achieved revenue of 1,336 billion yuan, with a year-on-year increase of 26.7%, of which the assisted reproduction success rate continued to increase by 0.9 percentage points to 57.5%; management services and ancillary medical services achieved revenue of 566 million yuan and 209 million yuan respectively, up 12.5% and 38.0% year-on-year respectively, while obstetrics and gynecology medical services achieved revenue of 470 million yuan in 2023, which remained stable.
Domestic and overseas layouts have been improved, and the number of cycles in each hospital district has been growing steadily. The company's domestic and overseas layout was gradually improved, and differentiated services were further promoted, and 30,000 egg retrieval cycles were achieved throughout the year, an increase of 16.2% over the previous year. The company layout was further improved, including 1) Chengdu & Greater Bay Area achieved revenue of 2.172 billion yuan in 23 years, up 11.9% year on year; 22,000 completed cycles, up 6% year on year; 2) Yunnan & Wuhan campus achieved revenue of 179 million yuan in 23 years, up 35.8% year on year, 4261 completed cycles, up 42.7% year on year; 3) US & Laos campus revenue of 570 million yuan in 23 years, up 23.4% year on year; overseas business showed resilience. Furthermore, the company is actively expanding the Southeast Asian market. Recently, the company reached a strategic cooperation with Morula, Indonesia's largest assisted reproduction group, to jointly explore the Indonesian and Southeast Asian markets. We believe that with the recovery of international travelers in 2024, the overall overseas business is expected to resume growth.
Profit forecasting and valuation. Taking into account factors such as overseas business is expected to resume growth and corporate cost investment, we lowered our net profit forecast of 24-25 million yuan to 3.98/462 million yuan (original value was 5.38/652 million yuan, down 26.0%/29.1%), and the net profit forecast for 26 years was 542 million yuan, corresponding EPS was 0.14/0.17/0.20 yuan, corresponding to 24-26 PE, divided into 15/13/11x. The company is the largest private assisted reproduction agency in China. The success rate is leading and remains stable. Currently, it is in a leading position in the Chinese and US markets and maintains a “buy” rating.
Risk warning: policy risk, merger and acquisition implementation and integration risk, overseas business risk, risk of loss of core technical personnel, risk of impairment of intangible assets, medical disputes.