Leading manufacturer of clinical informatization, with obvious card position advantages

The company is a leading enterprise in the field of clinical informatization in China. Its business areas cover the core fields of medical informatization such as electronic medical record systems, hospital data centers, smart medical solutions, etc., and fully serve various medical IT application scenarios. By the end of 2023, the company covered more than 1,600 hospital customers, including more than 600 of the top three hospitals, accounting for more than 30% of the top three hospitals in the country. The company relies on the card position advantage of the hospital's clinical informatization layout. In the future, as the share of clinical informatization in the medical IT market continues to increase, its performance is expected to achieve rapid growth beyond the industry. We expect net profit for 2024-2026 to be 1.11/1.81/266 million yuan, respectively. Referring to the comparable company Wind, the average 24PE is 26.7x. Considering the company's outstanding growth in the clinical information technology circuit, we gave the company 40x 24PE, corresponding to a target price of 32.09 yuan, covered for the first time, and gave it a purchase rating.

Electronic medical records rank first in the industry. “Using evaluation to promote construction” drives the rapid development of the company's business. Domestic medical informatization has entered a stage of rapid growth with electronic medical records as the core. The company's electronic medical records business has ranked first for nine consecutive years (2014-2022, IDC data). The first phase (2018-2022) electronic medical record rating requirements introduced by the National Health and Health Commission successfully promoted hospital informatization into a stage of rapid growth centered on electronic medical records. We judge that the 2024 hospital electronic medical record rating policy cycle will enter the second phase. The electronic medical record rating requirements for hospitals to meet the standards will be further improved. Compared with the first phase, the relevant investment scale is expected to increase significantly, and the company, as a leader in electronic medical records, is expected to continue to benefit.

As hospital rating requirements continue to improve, the company's advantage in building high-level electronic medical records will be further strengthened, and the growth of the core electronic medical records business may accelerate.

The data center product industry is leading. The short-term growth rate and long-term growth space are worth looking forward to data centers as another core business of the company, with both product competitiveness and broad market space. As the core application of electronic medical records level 5 construction, the data center construction pace is expected to accelerate significantly as level 3 hospitals across the country upgrade from level 4 to level 5 in the future, and the company's data center business will have both short-term high growth rate (from scratch to construction) and long-term steady growth (later optimization and upgrade).

According to Frost & Sullivan data, the Chinese hospital data center market will average compound annual growth of 28.0% in 2020-2025. As the core basic product for the construction of Level 5 electronic medical records and connectivity, data centers will maintain rapid growth over the next five years.

Specialized and intelligent products create a second growth curve, and “AI+ Healthcare” creates a new business model focusing on the clinical informatization circuit. The company is carrying out in-depth research and development of new specialized and intelligent products to create a second growth curve. Vertical development (specialist electronic medical records) and horizontal expansion (smart medical product system) are progressing simultaneously, and the breadth and depth of the company's application of clinical informatization will continue to increase. The company relies on electronic medical record platforms, hospital data centers and smart medical products to form a closed loop of clinical data production, data set, and data application. Based on massive medical data, the company continues to improve the “AI+ Healthcare” innovative product matrix.

In 2020-2022, the company's smart medical product sales revenue increased from 34.06 million yuan to 66.73 million yuan, with a compound annual growth rate of 39.98%. We believe that the company will further develop its advantages in data production and data sets, expand new business models on the data application side, and drive the long-term growth of the company's business.

Risk warning: Medical informatization policies fall short of expectations; hospital revenue levels decline; industry competition intensifies.