Core views

Ping An Health achieved revenue of 2.093 billion yuan and net profit of 60.63 million yuan in the first half of 2024, turning a loss into a profit over the previous year. Since implementing Strategy 2.0 transformation, the company has continuously promoted the development of F-side and B-side strategic business, and the business restructuring was basically completed in 2023. Through continuous optimization of resources and personnel allocation, the company actively uses AI to optimize processes, continuously improve operational efficiency, and successfully landed on 24H1. As the company's F-side business continues to empower Ping An Group, and the B-side business grows rapidly through group channels and self-service expansion channels, and the efficiency improvements and cost optimization brought about by superimposed information technology, we are optimistic about the company's continued growth as a professional and comprehensive healthcare management service provider.

occurrences

The company released the 24H1 performance report

In the first half of 2024, the company achieved revenue of 2.093 billion yuan, a year-on-year decrease of 5.8%, and a gross profit margin of 32.2%, the same as last year. Achieved net profit of 60.63 million yuan, turned a loss into a profit compared to 23H1 loss of 0.245 billion yuan, and achieved adjusted net profit of 89.74 million yuan.

Brief review

24H1 Achieve profitable landing, and strategic business continues to grow

In the first half of 2024, the company achieved revenue of 2.093 billion yuan, a year-on-year decrease of 5.8%. The decline in revenue was mainly due to the fact that H1's low strategic collaborative business was still being adjusted in 23, the overall base was high, and revenue recognition was delayed due to changes in some 24H1 business models. In the first half of '24, through continuous optimization of resource allocation, accelerated AI empowerment, and improved operational efficiency, the company's cost investment dropped significantly. The 24H1 company's management expenses rate decreased 15.2 percentage points year on year, and sales expenses fell 2.7 percentage points year on year, achieving net profit of 60.63 million yuan, and successfully turned a loss into profit compared to 23H1 loss of 2.4 0.5 billion yuan, and achieved an adjusted net profit of 89.74 million yuan.

In terms of payers, the 24H1 F-side strategic business achieved revenue of 1.12 billion yuan, an increase of 3.4% over the previous year, and the number of F-side paying users was 14.8 million, an increase of 7% over the previous year. The B-side strategic business achieved revenue of 0.71 billion yuan, a year-on-year increase of 58.8%. The number of B-side paying users was 2.6 million, an increase of 2% year-on-year, and the cumulative number of B-side service companies reached 1,748, an increase of 46% over the previous year. By business segment, the company's medical service 24H1 achieved revenue of 1.06 billion yuan, a year-on-year increase of 3%; health services achieved revenue of 0.98 billion yuan, a year-on-year decrease of 16.3%. The decline in revenue was mainly due to some less relevant physical sales businesses still in the adjustment stage in 2023; and pension services achieved revenue of 47.31 million yuan, an increase of 204.8% year on year.

F-side business collaboration continues to deepen, and there is huge room for long-term growth

Ping An Health can provide full-scenario medical health and pension services for Ping An Group's comprehensive financial customers, provide online/offline one-stop medical health and pension services for the Group's comprehensive financial customers such as life insurance, health insurance, industrial insurance, etc., and carry out targeted diversified design and combination of services and products according to different user profiles and service needs. By continuing to deepen collaboration between healthcare and pension services and insurance business, deeply participating in the health management of insurance policy customers, and improving customer service levels, the number of paying users in 24H1's life insurance strategy business increased 20% year-on-year, and revenue increased 14% over the same period last year. Currently, Ping An Group's personal finance customers are about 0.234 billion, and the number of the company's F-side strategic paying users is 14.8 million, and the penetration rate is less than 10%. In the medium to long term, the company still has a lot of room to improve its penetration rate. It is expected that by increasing member coverage and extending service content, the Group's financial customers will improve their health management level, and help the Group's business acquire customers and stick to customers while helping them achieve continuous growth.

The B-side business is growing rapidly, and the corporate health management market is broad

B-side enterprise health management is an important part of the company's strategy 2.0. It is committed to providing enterprise customers with comprehensive and professional one-stop enterprise health management solutions to help enterprise employees better manage their health. On the one hand, the client company is actively developing Ping An Group corporate customers, focusing on developing medium and large enterprises that value employee health management, have sufficient budgets, and are willing to pay. On the other hand, they are actively developing other customers based on the experience accumulated in the Group's customer development. 24H1 has accumulated 1,748 service companies, an increase of 46% over the previous year. In terms of products and services, the company continues to strengthen the health management product system of its “Easy Enterprise Health” enterprise. Through continuous optimization and improvement to meet the differentiated needs of different enterprises, it helps employees establish health files online for active health management, and provides targeted health management services offline to continuously improve satisfaction. The company's “Medical Examination+” has served a total of 1,070 enterprise customers, a cumulative year-on-year increase of 48.2%. It has served 771 corporate customers through “Health Management +”, with a cumulative year-on-year increase of 38.9%. Ping An Group has more than 0.056 million healthcare-related paying enterprise customers. With the company's continuous development of high-quality enterprise customers and cross-coverage of products and services, the company's B-side business is expected to continue to grow rapidly.

Expense analysis during the period: The gross margin remained stable, and the cost ratio decreased significantly. The company's 24H1 sales expense ratio, management expense ratio and R&D expense ratio were 17.5%, 11.1%, and 7.7%, respectively, -2.75 percentage points, -7.99 percentage points, and -7.21 percentage points, respectively. The company continued to improve the input-output ratio through optimized resource allocation, and the operating efficiency continued to improve, and the cost ratio for the period was drastically reduced by 17.9 percentage points. The gross profit margin of 32.2% remained the same as in the same period in '23. Thanks to excellent cost control, the company successfully turned a loss into a profit in the first half of the year, achieving net profit of 60.63 million yuan and a net interest rate of 2.9%. With the completion of the company's business restructuring, the comprehensive development of the strategic business, and the rapid increase in revenue scale. At the same time, the company actively carries out scientific and technological innovation to promote continuous improvement of the company's business model and business processes, and continuous improvement in operational efficiency, and the company's profit margin is expected to continue to improve.

Profit forecasts and investment suggestions:

As a leading medical health and pension service provider in China, the company provides customers with full-process integrated medical and health care services. The strategic business continues to develop and operational efficiency continues to improve. We expect the company to achieve revenue of 47.5, 54.2 and 6.25 billion yuan in 2024-2026, with year-on-year growth rates of 2%, 14%, and 15%. It corresponds to net profit attributable to mother of 1.7, 2.7, and 0.41 billion yuan, corresponding growth rates of 153%, 60%, and 48%. Maintain a “buy” rating.

Risk warning:

Customer growth falls short of expectations: The company's F-side business is deeply involved in Ping An Group's comprehensive financial customers, customizing corresponding services and products for various types of customers. On the one hand, the B-side business breaks through Ping An Group's corporate customers, and on the other hand, there is a risk that customer expansion will fall short of expectations and affect revenue growth; market competition intensifies risk: as a one-stop healthcare management service provider, the company replans the business structure, adjusts service content, and accelerates strategic business growth in the future; policy risks: the Internet healthcare industry has developed rapidly in recent years with policy support, and the scale of the industry is growing rapidly. There is a risk that policy changes will affect industry development in the future; cost management falls short of expectations risk.