Rapid revenue and profit growth in 2023
The company's revenue in 2023 increased 27.6% year over year to 4.08 billion yuan (RMB, same below), of which revenue after excluding the one-time impact of nucleic acid testing increased 34.0% year over year. The company's gross profit increased 25.0% year over year to 1.29 billion yuan, and shareholders' net profit increased 42.1% year over year to 680 million yuan. Adjusted net profit reflecting core business profits (excluding exchange gains and loss and equity incentive expenses, etc.) increased 17.5% year-on-year to $710,000 million. The company's revenue, shareholders' net profit, and adjusted net profit were slightly lower than our earlier forecast by 0.8%, 2.8%, and 0.4%, respectively, but they all achieved rapid growth.
Endogenous growth and epitaxial expansion go hand in hand, and 2024-26E revenue will maintain a rapid increase. We lowered our 2024-25E revenue forecast by 3.7% and 3.1%, respectively, but we still expect the company's revenue to maintain rapid growth. The 2023-26E CAGR is expected to be 22.2%, based on: 1) Management indicated that the number of patients treated at its hospitals has increased rapidly since 2024, and revenue is expected to increase 40% year-on-year in the first two months. 2) The company has excellent post-investment management capabilities and excellent operating performance of the new merger and acquisition hospital: Among the two hospitals acquired in the second half of 2023, the revenue of Yixing Haijia Hospital increased 31% year-on-year in June-December, and the revenue of Chang'an Haijia Hospital increased 29% year-on-year in September-December.
3) The three new hospitals that the company plans to open are progressing smoothly: Dezhou Haijia Hospital has passed the tertiary general hospital certification in 2024. Jiangsu Wuxi Haijia and Changshu Haijia are all built according to the scale of level-III hospitals, and are expected to be put into use by the beginning and end of 2025, respectively.
Target price was fine-tuned to HK$43.70, reaffirming the “Buy” rating
We slightly lowered our 2024-25E shareholders' net profit forecast by 1.7% and 0.2%, respectively, to reflect adjustments in revenue forecasts. We are still pricing 28 times 2024E PER, and the target price was fine-tuned to HK$43.70. Reiterate the “buy” rating.
Risk warning: (1) the acquisition of hospitals may require run-ins in the early stages; (2) medical accidents may affect reputation; (3) exceeding expectations, industry regulation affects performance