2023 results are in line with market expectations

American Health announced its 2023 results: revenue of 10.89 billion yuan, up 26.4% year on year; net profit to mother of 510 million yuan, corresponding to profit of 0.13 yuan per share; net profit after deducting non-return to mother of 463 million yuan, which turned a loss into a profit year over year. The results were in line with market expectations.

Development trends

The revenue side grew rapidly, and the profit side turned losses into profits by a large margin. The company achieved revenue of 10.89 billion yuan in 2023, an increase of 26.4% over the same period last year. The revenue growth rate for the same period last year was -6.5%; net profit after deducting non-return to mother was 463 million yuan, and net profit after deducting non-loss of 570 million yuan during the same period. By the end of 2023, the number of medical examination centers under the company was 596, of which 306 were controlled, an increase of 16 over 2022; the number of visitors received in the whole year reached 28.34 million, an increase of 13.0% over the previous year, and the comprehensive passenger unit price was 620.8 yuan, an increase of 11.2% over the previous year.

By brand, the “American Year Health” brand achieved revenue of 8.43 billion yuan, an increase of 26.9% over the previous year; “Ci Ming” and “Ci Ming Oya” achieved revenue of 2.28 billion yuan, an increase of 29.7% over the previous year.

Digital intelligence helps optimize management systems, and “industry-university-research integration+accurate customer positioning” promotes business innovation and promotion. 1) Actively promote digital transformation and AI technology research and development: The next-generation smart physical examination cloud platform “Bian Magpie” independently developed by the company in 2023 has achieved more than 95% branch coverage and has basically achieved the digital transformation of the entire business; in addition, the company combines big health examination data with AI technology, and its products are widely used in fields such as AI diagnosis of pulmonary nodules, AI diagnosis of brain cognition, and AI diagnosis of coronary calcification points to continuously meet the public's demand for high-quality health examinations. 2) Develop in-depth cooperation with top societies and universities. In September 2023, the company co-hosted the “First Preventive Medicine Innovation Summit and American Health Innovation Development Forum” with the China Health Management Association's organ function quantification management branch, and jointly launched the “China Million People Brain Health Screening Program” with the Institute of Brain Intelligence Science and Technology of Fudan University in December to actively create a new model of industry-university-research cooperation. 3) Precisely grasp customer positioning. In 2023, the company established the Group Inspection Development Center and the Individual Inspection Development Center, which are respectively committed to upgrading the B-side business led by major government and enterprise customers and gradually promoting the C-side customer operation system. The refined marketing system helps the rapid promotion of the company's business.

Operating indicators have improved significantly year over year, and profitability is expected to continue to increase. In 2023, the company's gross profit margin was 42.8%, up 8.4ppt year on year; net profit margin to mother was 4.6%, a sharp increase of 11.1ppt; sales expenses ratio was 23.5%, down 0.4ppt year on year; management expenses ratio was 7.6%, down 1.7ppt year on year. Considering the clear recovery of the company's revenue after the pandemic, and the company continues to improve overall organizational efficiency and achieve cost reduction and efficiency, we expect the company's profitability to increase steadily in 2024-25.

Profit forecasting and valuation

Maintain the 2024-25 EPS forecast of 0.21 yuan and 0.25 yuan. The current price corresponds to 2024-25 22.4/19.1xP/E. Maintaining the “outperforming industry” rating, but considering the downward shift in the sector's valuation center, the target price was lowered by 15.3% to 7.2 yuan, corresponding to 33.5/28.6x P/E in 2024-25, with room for an increase of 49.7% compared to the present.

risks

M&A progress or management improvements fall short of expectations; industry competition intensifies; medical emergencies.