Incident: The company released its 2023 annual report and 2024 quarterly report, and its performance was under pressure.
In 2023, the company achieved operating income of 9.147 billion yuan/ -12.84%, and net profit of 273 million yuan/ -34.58%. The decline on the revenue side for the full year of '23 was mainly due to a significant year-on-year decline in third-party laboratory testing services. In addition, due to domestic macroeconomic and medical policies, there was a slight decline in conventional business; the profit side decline was mainly due to factors such as no reduction in fixed expenses such as company service costs and depreciation of fixed assets, a slight extension of the accounts receivable repayment cycle, and structural changes in the age distribution of accounts, which increased the calculation of credit impairment losses.
In the first quarter of 2024, the company achieved operating income of 2,072 billion yuan/ -4.85%, and net profit of 23 million yuan/ -72.11%. The decline in the company's revenue in the first quarter was mainly affected by the domestic medical policy environment. The decline on the profit side was mainly due to changes in the billing structure of some hospital customers and the extension of historical repayment periods, which led to a large year-on-year increase in credit impairment loss accruals.
The industrial sector grew steadily, and the third-party laboratory business declined significantly due to the high base.
By business sector, the company's intensive business/regional inspection center business achieved revenue of 2,633 billion yuan/ -1.23% in 2023, mainly due to the impact of medical policies, slowing down the company's new customer expansion schedule and actively terminating some extended accounts. By the end of 2023, the number of customers at the company's intensified/district inspection center was 409; the industrial sector's revenue was 561 million yuan/ +15.73%. The steady growth in sector performance mainly benefited from increased performance brought about by new products. Among them, the medical informatization business revenue was 133 million yuan/+ 10.42%; Third-party laboratory business revenue of 296 million yuan/ -78.14%, mainly due to the impact of the high base in '22.
By gathering intelligent inspection and broadening application scenarios, AI products can be expected in the future.
The company focuses on intelligent testing and builds a digital testing platform based on big data and artificial intelligence technology, empowering traditional laboratory medical services to transform and upgrade traditional laboratory medical services to lean and intelligent in various aspects such as clinical test information management, intelligent laboratory management, and laboratory big data analysis and interpretation, and is committed to achieving digital testing and diagnosis. At present, the company has developed a variety of digital and AI products for intelligent laboratory management and laboratory quality control management, which have good application prospects. At the same time, the company is extending digital healthcare and AI technology to pharmacy and physical examination applications. 1) In terms of pharmacy scenarios, the company and Liuyao Group cooperate in the fields of smart pharmacies, smart hospitals, smart medical clouds, etc., to use AI large-scale model technology to enable integrated intelligent management of the entire disease process from prevention, diagnosis and treatment to medication rehabilitation, to form a one-stop “medical+medicine+health management” full-life cycle service closed loop; 2) In terms of physical examination scenarios, the company cooperated with Meinian Health to create the first domestic health management AI robot, “Health Xiaomei” digital intelligence manager, to provide more intelligent technology and business solutions for the health examination industry.
Investment advice:
Increased holdings - A investment rating, 6-month target price of 21.74 yuan. We expect the company's revenue growth rates from 2024 to 2026 to be 15.29%, 16.92%, and 16.29%, respectively, and the net profit growth rates will be 36.08%, 19.05%, and 16.69%, respectively. For the first time, the 6-month target price is 21.74 yuan, which is equivalent to a dynamic price-earnings ratio of 35 times that of 2024.
Risk warning: the risk of policy changes in the pharmaceutical industry, the risk that AI product development progress falls short of expectations, and the risk of extended accounts receivable repayment cycles.