The financial business remained steady in 2023, and the healthcare business further accelerated. Global Healthcare is a listed company controlled by a central enterprise with healthcare as its main business. As of the end of 2023, it has consolidated 14,353 beds, and also provides various services such as full-cycle equipment management, specialist operation, and Internet medical care for hospital customers; it also provides comprehensive financial solutions centered on financial leasing. Revenue of $13.650 billion was achieved in 2023, up 13.1% year over year. Among them, the healthcare business revenue was 7.833 billion yuan, up 22.9% year on year, accounting for 57.4%; annual profit was 2.99 billion yuan, up 5.4% year on year, of which the healthcare business contributed 454 million yuan, up 20.6% year on year; net profit to the mother was 2,021 million yuan, up 7.0% year on year, of which the healthcare business contributed 365 million yuan, up 45.8% year on year. The share of revenue in the healthcare business segment increased from 53% to 57%, and the share of net profit increased from 18% to 21%.

The financial business remains steady, and profitability continues to be pressured by the US dollar interest rate hike and the impact of the macroeconomic environment. In 2023, the company's financial business achieved revenue of 5.882 billion yuan, an increase of 2.8% over the previous year. The average return on interest-bearing assets is 6.90%, the average cost ratio of interest-bearing liabilities is 4.26%, the net interest spread is 2.64% (-0.60pp), and the net interest spread is 3.16% (-0.51pp). Among them, the revenue side is affected by the policy and market environment, and the company selects high-quality projects; the cost side is affected by the US dollar interest rate hike. The company continues to optimize the financing structure and actively obtain low-cost capital using the market environment where domestic monetary policy is relatively relaxed. In order to cope with the impact of the US dollar interest rate hike, the company actively adjusted and optimized the financing structure. By the end of 2023, the share of foreign currency financing had decreased by 11% compared to the end of the previous year.

The quality of the company's assets continued to be good. By the end of 2023, the average balance of the company's interest-bearing assets reached $69.498 billion, an increase of 8.2% over the beginning of the year; the non-performing asset ratio was 0.98%, and the provision coverage rate was 284.55%.

The profitability of the hospital business continues to increase, and the full-cycle equipment management business has surpassed energy levels. In 2023, medical institutions achieved revenue of 7.466 billion yuan (+20.7%); realized annual profit of 336 million yuan, an increase of 16.4% over the previous year; excluding the impact of special factors, the comprehensive net profit margin of medical institutions was 5.10% (+0.16pp). Excluding the impact of newly opened beds at Xidian Hospital, the average annual income for a single bed increased to about 510,000 yuan, an increase of about 10.1% over the previous year. In 2023, the specialty and health industry achieved revenue of 244 million and profit of 32 million during the year. The company successfully acquired companies such as Case Xuanda and Shandong Tuozhuang, and managed equipment assets of nearly 20 billion yuan. The company has established cooperative relationships with more than 10 well-known domestic and foreign equipment manufacturers, and will jointly begin industry standard setting with the China Medical Equipment Association.

Investment advice: Considering financing costs and macro-environmental impacts, the 2024-25 profit forecast was lowered, and the 2026 profit forecast was added. The estimated net profit for 2024-26 is 21.08/22.81 billion (originally 22.48/2,528 billion in 2024-25), up 4.3%/8.2%/8.8% year-on-year, and the PE corresponding to the current stock price is 4.2/3.9/3.6 times. The company's healthcare business has plenty of room for value reshaping, the valuation is cost-effective, and maintains a “buy” rating.

Risk warning: New business expansion falls short of expectations, health insurance cost control exceeds expectations, risk of medical accidents.