The Zhitong Finance App learned that China Post Securities released a research report saying that “WIND Healthcare Service” was selected for comparison. Judging from PS, Japan has stabilized at about 1 times, and the US is relatively high, with a maximum of 2.5 times. Since 2022, it has gradually declined to 1 times. Mainland China and Hong Kong, China are at a high level of PS in 2010-2020. Currently, both have declined markedly. In terms of combined growth, the overall growth rate of the healthcare services sector in Hong Kong, China is significantly higher than that of the US and Japan. In terms of PE, as of April 9, 2024, the PE in the health care service sector in Hong Kong, China was 12.5 times lower, lower than Japan (16.1 times), the United States (25.7 times), and mainland China (34.7 times), and is at a significantly lower level. Based on the above, the valuation of the healthcare services sector in Hong Kong, China is highly attractive.

The main views of China Post Securities are as follows:

Most of the performance targets of Hong Kong stocks achieved steady growth in health services

Judging from the overall performance of medical service targets in Hong Kong stocks, with the exception of ICL's high revenue base in the early COVID-19 period, where dental revenue was affected by dental implant collection, most of the revenue from other medical service targets increased relatively well.

Volume-price splitting: the amount of diagnosis and treatment needed is increasing steadily, while consumer medical prices are declining due to weak demand

After comprehensive medical care entered normalized operation, volume recovery was obvious, and prices declined slightly. It is expected to be related to the expansion of the scope of drug consumption collection and the reform of DRGs medical insurance payment methods. Prices of consumer ophthalmology surgeries have declined due to the economic impact. Prices for diagnostic and treatment surgeries have not changed, and the volume has increased significantly as the population ages. In terms of dentistry, the collection of dental implants has led to a drop in customer unit prices, and competition in the dental diagnosis and treatment market has become more intense. What is more special is port medical services. Due to the obvious price difference between the two places and serious shortage of medical services in Hong Kong, China, it has contributed to a rapid increase in passenger flow while prices have not changed much. Facilitated by factors such as the COVID-19 pandemic and the upgrading and popularization of testing technology, industry demand has increased and upgraded, leading to a sharp rise in volume and price. The number of assisted reproduction cycles continued to grow rapidly, and the price of a single cycle increased steadily. ICL's routine testing volume is growing steadily, and new and upgraded testing programs are increasing the unit price of testing.

Outreach: Actively seek M&A opportunities and expand into new regions/new businesses/new technologies

In addition to acquiring hospitals that focus on basic diagnosis and treatment, comprehensive medical institutions have also increased the cultivation of specialists and achieved high-quality results. Kanghua Medical has also increased the layout of hemodialysis centers; ophthalmology institutions continue to expand their network layout through self-construction and acquisitions; assisted reproduction institutions continue to seek mergers and acquisitions at home and abroad; oncology medical service institutions actively acquire high-quality targets to achieve better business collaboration through integration; dental institutions are currently mainly expanding their layout through self-construction. There are relatively few acquisition projects and are concentrated on the business or upstream and downstream layout that is different from the company's original main business; traditional Chinese medicine service institutions are in With growing demand and policy support, active mergers and acquisitions expand market share; ICL mergers and acquisitions and foreign investment opportunities have increased significantly. As competition for general inspection heats up, special inspection has become the core competitiveness for subsequent development.

Analysis of external factors: The impact on the economic environment is significant, the impact of anti-corruption is limited, and policies are more favorable

The economic environment has had a certain impact on domestic and international consumer health care. For example, refractive demand in the UK and Germany is weak, the economic environment has little impact on basic medical services, and demand is steady and prices are stable. The fight against corruption has had a slight impact on comprehensive health care and has little impact on other health services. The health insurance policy is beneficial to the formation of more targets. Medical insurance reimbursement for some assisted reproduction projects has been implemented at an accelerated pace, and the penetration rate has increased markedly; the reform of collection and medical insurance payment methods has promoted its refined operation to increase the hospital balance rate; and the overall promotion of general health insurance outpatient services has promoted the rapid development of traditional Chinese medicine outpatient services.

Investment advice

China Post Securities said it is optimistic about basic diagnosis and treatment services that are less affected by the economy, with steady demand and stable prices, including comprehensive medical care, oncology services, diagnostic ophthalmology services, assisted reproduction, ICL, medical examinations, etc. On this basis, it is more optimistic about medical service targets with positive mergers and acquisitions expectations, favorable policies (such as including some assisted reproduction projects included in medical insurance reimbursement), and new business/technology development (such as laying out specialists/developing new service projects).

Recommended target: Hygea Healthcare (06078).

Beneficiaries: Jinxin Reproduction (01951), Gushengtang (02273), Global Healthcare (02666), Xima Ophthalmology (03309), Chaoju Ophthalmology (02219), Aidi Palace (00286), Yunkang Group (02325).

Risk warning:

The macroeconomy affects spending power; reforms in health insurance payment methods affect short- and medium-term health insurance income.