Key points of investment:
Incident: Weining Health released its 2023 financial report, achieving operating income of 3.163 billion yuan, a year-on-year increase of 2.28%, net profit to mother of 358 million yuan, a year-on-year increase of 229.49%, and net profit after deducting non-return to mother of 333 million yuan, an increase of 178.51% year-on-year.
Net profit attributable to mother is within the performance forecast range. The earnings forecast announced net profit of 3.51 to 455 million yuan for the year 23, which was actually 358 million yuan. The net profit not attributable to mother was 3.08 to 412 million yuan. The actual net profit of 333 million yuan was low in the forecast range.
Revenue increased 2.28% year over year, which is generally in line with market expectations.
The main business, medical IT, is growing steadily, and the Internet medical business continues to optimize losses and narrow. Industry factors had a certain impact on the overall order release during the reporting period. The amount of new orders signed by the company's medical IT still increased slightly year on year, and the company's medical IT business increased by 12.66% year on year in 2023. The Internet medical business declined by 44.53% year-on-year during the reporting period. The net losses of the three major companies, Nari Health, Huanyao Weining, and Weining Technology, narrowed by 37.12%, 64.21%, and 24.91% respectively during the reporting period.
The increase in the share of high-margin medical IT businesses led to an increase in overall gross margin. The company's gross profit margin in 2023 was 45.0%, an increase of 1.31pct over the previous year. Among them, the share of high-margin medical IT business revenue increased from 81.8% in 2022 to 90.0% in 2023. At the same time, the Internet healthcare business was optimized effectively, and the gross margin increased by 7.51pct.
The fee control situation is good. In 2023, the company's sales expenses rate was 14.53%, down 1.51 pct year on year; management expenses ratio was 6.2%, down 0.67 pct year on year; R&D expenses rate was 10.54%, up 0.39 pct year on year, and actual expenses and compensation for 2023Q3Q4 continued to decline. The company and Beijing Global Medical Rescue Co., Ltd. and its shareholders implemented a share exchange, merger and restructuring, and the financial expenses ratio rose to 1.61%, an increase of 0.33 pct over the previous year.
Adhere to the 1+X strategy to accelerate the digital upgrading of products. The company continues to upgrade the WineX series of core products to enable smart hospitals, smart health, and Internet+healthcare scenarios: 1) major WineX upgrades; 2) implementation of large-scale medical models; 3) addition of 60+ 10 million level projects; 4) continuous expansion of Internet+ healthcare.
Profit forecasting and evaluation. Due to uncertainty about the recovery of the impact of the industry and the optimization and adjustment of the company's Internet business, the 2024-2025 revenue forecast was lowered to 36.54 billion yuan, 4.167 billion yuan, and the original forecast was 4.650 billion yuan and 5.630 billion yuan. The company's investment in upgrading WineX and medical models increased, and the 2024-2025 net profit forecast was lowered to 477 million yuan and 670 million yuan, and the original forecast was 581 million yuan and 687 million yuan. The additional 2026 revenue forecast was $4.771 billion, and the net profit forecast was $815 million. Considering 1) new AI products are expected to open up space for subsequent revenue growth, 2) hospital orders are delayed due to the macro environment, and business will resume after macro-environmental factors calm down, 3) and currently the company is still the leading market share in the medical IT industry, maintaining a “gain” rating? Risk warning: New product sales fall short of expectations, industry competition intensifies, and the risk that the macro environment will affect the revenue of hospital customers.