Key points of investment

Revenue growth was impressive in 2023, and profitability is expected to gradually improve: in 2023, the company achieved revenue of 4.618 billion yuan (+70.34%, up 70.34% from the same period last year, same below), net profit to mother of 368 million yuan (+68.70%), net profit net profit after deducting 499 million yuan (+55.55%), and profit side losses for the whole year narrowed. Looking at Q4 of 2023, the company achieved revenue of 1,274 billion yuan (+59.86%), a record high of revenue for the single quarter, net profit to mother - 146 million yuan (+58.23%), net profit from non-return to mother - 149 million yuan (+55.42%). In Q1 2024, the company achieved revenue of 1,173 billion yuan (+10.75%), net profit attributable to mother of 105 million yuan (-40.37%), and net profit after deducting non-return to mother of 90 million yuan (+13.05%), further reducing losses compared to 23Q4. In 2023, the company concentrated on integrating superior resources, successfully completed the transfer of shares in Shangluo International Medical Center Hospital, reduced debt levels, and further optimized the asset structure.

Various important medical quality indicators of Xi'an Gaoxin Hospital have reached record highs, and the business scale of the International Medical Center Hospital continues to expand. In 2023, the company provided 2.3887 million outpatient emergency services (+54.4%) and 185,900 inpatient services (+70.8%). Looking at branches, in 2023, Xi'an Gaoxin Hospital had revenue of 1,485 billion yuan (+50.53%), net profit of 696.933 million yuan (+217.23%); 1.1511 million outpatient emergency services (+32.71%); 64,600 inpatient services (+ 56.04%); 66,600 physical examination services (+35.26%); the highest number of daily outpatient emergency services was 4,952, with a maximum of 1,865 patients per day. The business scale of Xi'an International Medical Center Hospital is growing rapidly, and the specialty layout is becoming more and more perfect. In 2023, Xi'an International Medical Center Hospital (including the North Hospital) achieved revenue of 3,043 billion yuan (+87.97%), net profit of 261 million yuan (+66.13%); 1,23,600 outpatient emergency services (+108.07%); 1212,000 inpatient services (+92.69%); 60,800 physical examination services (+80.32%); the highest number of outpatient emergency services per day was 5,299, with 3937 patients per day, with a significant increase in various medical data.

Discipline and talent building promote high-quality hospital development, and innovate medical service models to enhance patients' medical experience. In 2023, Xi'an Gaoxin Hospital officially launched the top three review work, and the hospital's content construction reached a new level. Xi'an Gaoxin Hospital has established a new plastic surgery hospital, an ophthalmology hospital, and various special services and diagnosis and treatment centers such as digestive endoscopy, cardiopulmonary rehabilitation, pulmonary nodule diagnosis and treatment, and VIP health management to meet the diverse needs of patients. In 2023, the high-tech hospital introduced 160 outstanding talents, and the expert team added 339 new academic positions. Xi'an International Medical Center Hospital established the Endocrinology and Metabolism Hospital, opened 17 new departments or units, including the Five Cardiovascular Medicine Departments and the Breast Disease Diagnosis and Treatment Center, and introduced 622 outstanding talents of various types, including 2 subject leaders, 112 master's degrees, and 6 professionals with senior titles and 51 intermediate titles. In 2023, the North Campus of Xi'an International Medical Center Hospital was officially opened. The North Campus actively promoted interdisciplinary cooperation and innovated the “Orthopedics - Rehabilitation Integration” and “Obstetrics and Gynecology - Rehabilitation Integration” projects, opening up cooperation channels between orthopedics, obstetrics and gynecology, and rehabilitation departments, significantly improving patients' medical experience. Furthermore, the North Hospital successfully introduced 1,219 outstanding talents of all kinds, providing strong support for the development of the hospital.

Profit forecast and investment rating: Considering that the company will still be affected by depreciation and amortization in the new campus in 2024-2025, we lowered our net profit forecast for 2024-2025 from 287/546 million yuan to 801/305 million yuan. The net profit forecast for 2026 is 560 million yuan, and the PE corresponding to the current market value is 173/46/25X. Revenue for 2024-2025 was reduced from 61.03/7.527 billion yuan to 5.844/7.230 billion yuan, and the 2026 revenue is expected to be 8.463 billion yuan, which corresponds to the current market value of PS 2.4/2.0/1.7X. The company is currently in a stage of upward growth in performance. As the number of beds in the company's core hospitals steadily climbs, the valuation will be quickly digested. Maintain a “buy” rating.

Risk warning: risk of bed climbing or falling short of expectations, risk of hospital profits rising or falling short of expectations, risk of losing core doctors, risk of policy uncertainty, etc.