Core views:
The company disclosed its 23-year results announcement. The hospital business revenue grew steadily, and the adjusted segment performance margin increased. Revenue in '23 was $10.108 billion, +79.8% year-on-year (if Liaojian and Jiang Neng were not included in the same period in '22), and stock revenue increased 7% year-on-year. Net profit attributable to mother was 258 million yuan (YoY -3.1%), and net profit to mother after excluding Huaiyin impairment was 644 million yuan, +127.4% YoY (if Liaojian and Jiang Neng were not included in the same period in '22), of which net profit from stock was +23% YoY.
The hospital's business revenue grew steadily, mainly due to the increase in the number of patients treated and the increase in bed usage.
Including Liaojian and Jiang Neng, hospital revenue was +8.4% year-on-year to 9.406 billion yuan. Among them, the revenue of existing hospitals, Liaojian and Jiangneng hospitals increased 9.7% and 6.9% year-on-year respectively; the increase was mainly due to +10.0% year-on-year increase in routine visits and 7.4% increase in bed usage. After excluding the effects of nucleic acid, outpatient revenue in '23 was +8.2%, outpatient volume was +10% year over year; inpatient income was +8.1% year over year, and hospitalization volume was +10%. The revenue of the reserve project Aerospace Science and Technology reached 2.36 billion yuan in 23 years, and turned a loss into a profit.
The gross margin and profit margin of the hospital business increased by 2.7 pct and 2.3 pct respectively in '23. Thanks to the recovery in diagnosis and treatment volume and significant cost control results, the hospital's gross profit increased in '23. The gross margin of the hospital business was +2.7 pct to 18.4% year on year, and the adjusted profit margin (excluding the impact of Huaiyin impairment) was +2.3 pct to 10.2% year over year. The stock of hospitals and Liaojianjiang increased.
Profit forecasting and investment advice. It is expected that the hospital business will maintain steady growth. No additional impairment will be taken into account in 24. Revenue for 24-25 will be 10.821/11.665 billion yuan, and net profit to mother will be 650/712 million yuan. Its hospitals continued to recover and operational efficiency improved in 23 years, and the operation of Huaiyin Hospital is expected to improve. Referring to comparable company valuations, combined with the company's growth and Hong Kong stock liquidity, a PE of 12 times in 24 years was given, corresponding to a reasonable value of HK$6.52 per share. Maintain a “buy” rating.
Risk warning. The Group's hospital network expansion process fell short of expectations; the integration or operation of mergers and acquisitions fell short of expectations; exchange rate fluctuations brought market risks; and the risk of brain drain.