Incident: In 2023, revenue of 10.894 billion yuan (+26.44%) was achieved, net profit attributable to mother was 506 million yuan, and net profit of non-return to mother was 463 million yuan, turning a loss into a profit. 2023Q4 achieved revenue of 3,676 billion yuan (+29.77%), net profit attributable to mother of 280 million yuan, and net profit of non-return to mother of 235 million yuan.

The performance was in line with forecast expectations. The revenue side grew rapidly, and the profit side turned a loss into a profit: Q4 is the traditional peak season, and profitability gradually increased as revenue scale expanded. 2023Q4 gross margin reached 48.59%, up 8.95pct year on year, 4.54pct month-on-month; net profit margin reached 9.76%, up 0.69pct month-on-month. We believe that as the company reduces costs and increases efficiency, and the scale of revenue continues to expand, profitability is expected to continue to increase. Expenses for the 2023 period, including sales/management/finance expenses, were 23.53%/7.64%/2.75% (-0.06/-1.72/-0.55pct), respectively, with significant improvements on the cost side.

The medical examination industry is showing a continuous growth trend, and leading performance has achieved a sharp rise in volume and price: with the rapid expansion of medical examinations for the aging population and primary and secondary school students, compounded by the increase in public awareness, the penetration rate of the medical examination industry is expected to continue to increase. As of 2021, China's medical examination coverage rate was about 38.88%, while the medical examination coverage rate in developed countries such as the United States and Japan in 2017 was over 70%, and Germany was over 90%. As a leader in non-public medical examinations, Meinian continues to enjoy the dividends of industry growth, and its performance has risen sharply in volume and price. In 2023, the company received a total of 28.34 million visitors (including participating centers, excluding nucleic acid tests), an increase of 13% over the previous year. Of these, the holding center received a total of 17.55 million visitors, an increase of 13.7% over the previous year; the comprehensive customer unit price was 620.8 yuan, an increase of 11.2% over the previous year.

AI+ healthcare has great potential for future value: The company will generate a large amount of unstructured imaging data and structured medical examination data in the process of providing medical examination services. As AI applications gradually mature, data assets have great potential for future value.

Investment advice: We expect the company to achieve operating income of 119.55/136.82/15.515 billion yuan and net profit to mother of 775/10.16/1.06 billion yuan in 2024-2026. The corresponding PE was 23.13/17.64/13.73 times, respectively, maintaining the “gain” rating for the company.

Risk warning: goodwill calculation risk of impairment, risk of medical quality, risk of falling short of expectations in the medical examination industry, etc.