Incidents:
On March 26, 2024, Xima Ophthalmology released its 2023 report. The company achieved revenue of HK$1,924 million (+11.09%), gross profit of HK$619 million (+38.25%), EDITDA of HK$343 million (+52.42%), and profit attributable to shareholders of HK$62 million (turning loss into profit).
Comment:
Profitability picked up after the epidemic, and attention was paid to cost rate adjustments in anticipation of Hong Kong people's business expansion. In 2023, the company's ① gross profit margin was 32.17% (+6.32pct), and the gross margin of the mainland dental business increased significantly; ② the sales expenses ratio was 7.68% (+0.36pct), ③ the management expenses ratio was 18.45% (-1.49pct), mainly due to scale effect allocation of expenses.
Ophthalmology+Dentistry and Hong Kong+Mainland China are rapidly expanding the scale of the medical service business under the combined driving force. ① Split from the business division, in 2023, the company's ophthalmology services revenue was HK$1,266 million (+17.87%), dental services revenue of HK$428 million (+161.27%), other medical services revenue of HK$48 million (+38.21%), and sales of vision support products was HK$163 million (+1.01%). The increase was mainly in the dental business. Thanks to Hong Kong people's high demand for high-quality dental services and the full resumption of customs clearance between Hong Kong and Shenzhen, Shenzhen Elkangjian achieved revenue of HK$385 million (+ billion) in 2023 207.76%); ② In terms of geographical distribution, the total revenue in Hong Kong (excluding the COVID-19 consumables business) was HK$932 million (+15.69%), and the total revenue in the mainland region was HK$972 million (+54.87%). The company has accelerated its layout in the mainland. The layout of hospitals has also begun to expand rapidly, and the mainland's share of revenue has increased significantly.
The layout of medical institutions continues to expand, benefiting from Hong Kong's brand building receiving policy support. ① Hong Kong layout:
By the end of 2023, there were 5 day surgery centers, 8 ophthalmology satellite clinics, 6 optometry centers, 6 dental clinics, 3 general clinics, 1 oncology center, and 1 one-stop medical+dent+eye service center (there was no net increase in the port layout during the year); ② Mainland layout: 9 ophthalmology hospitals, 1 ophthalmology center, 3 satellite ophthalmology clinics, 1 dental hospital and 12 dental clinics (1 ophthalmology center reduced during the year); ③ Greater Bay Area business: On February 19, 2024, the company announced that Shenzhen Aikangjian Dental Hospital is included in the “Greater Bay Area Pilot Program for Elderly Health Care Vouchers”, which is expected to benefit about 1.7 million eligible persons (the basic policy is to receive HK$2,000 per person per year). The company also officially announced the construction of the Luohu Port Hong Kong Port General Hospital with dentistry, ophthalmology, and medical imaging as the core, with a total area of over 10,000 square meters. It is expected to be put into operation around July 2024.
Profit forecast and investment advice: The company is a leading private ophthalmology service provider in Hong Kong. It continues to expand its layout in the mainland, and the Greater Bay Area business is supported by the policies of the two regions. We expect the company's revenue in 2024-2026 to be HK$2,198/25.08/HK$2,840 million, and net profit to mother of HK$0.78/0.98/HK$122 million, corresponding to the 2024-2026 PE of 44X/35X/28X. For the first coverage, we gave the company an “gain” rating.
Risk warning: policy risk, risk of hospital expansion falling short of expectations, and increased risk of industry competition.