Through transformation, a high-level, research-based, and multi-level comprehensive medical service platform has taken shape. Adhering to the tenet of “protecting the immeasurable value”, and with the innovative business model of “comprehensive medical+special specialties”, international medicine has now become a full-life medical and health platform. With all three comprehensive medical centers of the company's high-tech hospitals and central hospitals being put into operation, the scale of international medical services with 10,000 beds is beginning to take shape. Through more than 20 years of exploration in the field of medical services, the company already has excellent management experience and operational capabilities in comprehensive medical care. In the future, as the revenue of the International Medical Center Hospital continues to break through new highs, the scale of the medical service business will reach a new level.

Gaoxin Hospital: The first top three hospitals for social medicine in ****'an High-tech Hospital is located in the Xi'an High-tech Industrial Development Zone. It has 1,500 open beds and has a number of specialties with key strengths represented by neurology. It has now developed a certain level of popularity and brand influence in Xi'an City, Shaanxi Province, and even the northwest region. With the second phase of the Gaoxin Hospital being put into use in December 2020, the scale gap between the high-tech hospital and the top three local public hospitals continued to narrow, and the development of the top three private benchmark hospitals reached a higher level. Currently, high-tech hospitals are basically at full capacity. As hospitals that have entered a stable development stage, we expect that in the future, high-tech hospitals are expected to achieve an income of 15-20 billion dollars.

International Medical Center Hospital: Asia's largest single hospital, which is expected to reverse losses soon. Relying on existing top software and hardware facilities and unique expert resources, the International Medical Center Hospital passed the international JCI certification with a full score in May 2021, and the medical quality is in line with the international community. At the same time, to achieve wider coverage of the medical service network, the company actively opens up medical insurance services, expands the cooperative medical consortium network, and continues to sink high-quality medical resources, based in Xi'an, covering Shaanxi, and radiating the Midwest. Trial operation of the North Hospital began in January 2023. The scale of medical services at the Central Hospital has been further expanded, and a new high level of revenue can be expected. It is expected that due to the scale effect, the time for the Central Hospital to reverse its losses is getting closer. In the medium to long term, the International Medical Center Hospital, as a very large single general hospital in China, is expected to advance to a revenue scale of 10 billion dollars in the future.

The medium- to long-term platform value helps the company to be stable and far-reaching. Despite the large number of top three hospitals in Xi'an, the high-tech zone is still not fully satisfied with the region's medical resources as a long-term development engine; in the medium term, the potential demand for the next 2.5 million people in the high-tech zone may exceed 20,000 beds. As a platform for large-scale comprehensive for-profit medical institutions, international medicine not only integrates resources to provide a full range of medical services, but also continuously promotes medical technology innovation and comprehensively promotes the development of the health industry chain. The layout of the company's specialty specialists has a broad patient base, high barriers and excellent layout, which is expected to drive the improvement of the level of diagnosis and treatment throughout the province. At the same time, stem cell clinical trial institutions and drug clinical trial institutions have been approved one after another. The high-level research hospitals that the company continues to build provide patients with more advanced diagnosis and treatment technology, effectively improve the cure rate, and improve the company's medical education and research strength and medical service level in the long term.

Investment advice: In 2024, the company is expected to fully reverse losses and drive various indicators to form a positive cycle.

We expect the company's revenue in 2023-2025 to be 45.98 billion yuan, 5.938 billion yuan, and 7.219 billion yuan, respectively, up 69.6%, 29.1%, and 21.6% year-on-year, and net profit to mother of -2.80, 1.91, and 572 million yuan, respectively. According to DCF model estimates, we expect the reasonable valuation of the company in 2024 to be RMB 212 billion, corresponding to the target price of RMB 9.4 billion.

Covered for the first time, with a “recommended” rating.

Risk warning: 1. Price adjustments for medical services exceeded expectations; 2. The increase in bed usage fell short of expectations; 3. Risk of changes in health insurance policies, etc.