Incidents:

The company released its 2023 annual report and quarterly report: in 2023, it achieved revenue of 4.618 billion yuan (+70.3%); net profit to mother and loss of 3.68 billion yuan and 499 million yuan respectively. Losses decreased by 68.7% and 55.6% year-on-year. Among them, 2023Q4 revenue was 1.274 billion yuan (+59.9%); net profit due to mother lost 1.46 billion yuan and 149 million yuan respectively, a year-on-year reduction of 58.2% and 55.4%; 2024Q1 achieved revenue of 1.17 billion yuan (+10.8%), net profit to mother - 105 million yuan (-40.4%), after deducting non-return to mother - 90 million yuan (+13.1%), and losses continued to improve.

The order of medical treatment has been restored, and the central hospital beds have climbed steadily. In 2023, the North Campus of the Central Hospital opened, and 19 new departments, including the Department of Minimally Invasive Spine, the Department of Neurological Rehabilitation, and PICU, were established, effectively expanding the overall scale of the company's medical service business. The central hospital (including the North Hospital) had 1,238 million outpatient emergency visits (+108.1%), 121,000 admissions (+92.7%), and 61,000 physical examinations (+80.3%). The highest number of outpatient emergencies per day was 5,299, and the highest number of daily hospitalized patients was 3,937. The number of outpatient emergency and inpatients continues to increase, and it is expected that the number of beds will continue to rise rapidly and the business will continue to improve.

High-tech hospital beds are nearly saturated, and net profit is expected to continue to improve. High-tech hospitals achieved revenue of 1,485 billion yuan (+50.53%) and net profit of 69.6933 million yuan in 2023. The beds have now reached full capacity. The hospital has 1.51 million emergency visits (+32.7%), 65,000 hospitalizations (+56%), 66,000 medical examinations (+35.3%), the bed usage rate is basically saturated, and the hospital operation situation has reached a record high. Currently, the hospital net interest rate is 4.7%. Referring to the previous net interest rate level of high-tech hospitals, it is expected that the net interest rate will continue to improve after the hospital management efficiency is improved.

“Comprehensive Medicine+Special Specialties”, the siphon effect of medical treatment continues in radiation areas. The company's two hospitals have introduced nearly 1,841 new departments, including 7 subject leaders, 267 master's degrees, 64 senior titles, and 153 mid-level professionals. The company combines serious medical treatment with consumer medicine, focuses on traditional superior specialties, provides inclusive medical services, leverages the medical highlands of northwest China, and continues to attract patients seeking medical treatment from other places. At the same time, the company continues to actively cultivate fields such as medical and aesthetic plastic surgery, assisted reproduction, rehabilitation, women and children, health management, special needs, and proton therapy.

Profit forecast: Considering that the company's performance continues to rise and improve, the company is expected to reverse losses at an accelerated pace as a whole.

The company's revenue for 2024-2026 is expected to be 60.93/76.68/9.303 billion yuan respectively, with net profit reduced to mother of 1.72/3.71/598 billion yuan, EPS to 0.08/0.16/0.26 yuan respectively, and corresponding PB of 3.33/3.05/2.69 times, respectively, maintaining the company's “buy” rating.

Risk warning: bed climbing falls short of expectations, health insurance policy risk, medical accident risk.