Incidents:

American Health released its 2024 semi-annual report on August 30: In the first half of 2024, the company achieved revenue of 4.205 billion yuan (-5.53%, year-on-year caliber, same below) and net loss to mother of 0.216 billion yuan, which is in line with the median performance forecast.

Investment highlights:

Customer unit prices continued to rise steadily. From the first half of 2022 to the first half of 2024, the unit prices for the company's physical examination customers were 514 yuan, 594 yuan, and 653 yuan respectively. Benefiting from the price return of basic medical examination programs, customer structure optimization, and innovative projects, the unit price of the company's customers continued to rise steadily.

The share of personal inspection revenue increased. From the first half of 2022 to the first half of 2024, individual customers accounted for 24%, 23%, and 33% of the company's revenue, respectively, and the share of personal inspection revenue increased markedly.

The company strengthened public domain platform cooperation and store performance, and the online personal inspection business continued to grow rapidly; strengthened private domain traffic operations, continued to improve the private domain platform Mei Nian Premium Online Mall Mini Program and the private domain management system Xinghai system, and built a three-dimensional intelligent marketing system that “continuously imports traffic in the public domain, retains and converts traffic in the private domain”. The personal inspection business is expected to continue to grow rapidly.

Revenue side: The high base was one of the main factors that weighed on revenue year-on-year in the first half of the year. Positive growth was achieved in the second quarter of a single quarter. The medical examination business is seasonal. The first quarter was a low season for the industry. In the first quarter of 2023, the off-season was not weak and the base was high due to backward demand and the increase in Yangkang, which was the main reason why revenue in the first half of 2024 was under year-on-year pressure. The company's performance in the second quarter of 2024 achieved positive growth, with revenue of 2.4 billion yuan, up 3% year on year and 33% month on month; gross profit margin was 41.36%, up 0.02 pct year on year, and 13.32 pct month on month.

Profit side: The decline in single store revenue and reception volume was the main reason affecting profitability in the first half of the year.

The total number of holding and participating branches of the company was 608, and the total number of visitors in the first half of 2024 was 9.88 million (-21%); of these, 310 holding stores received 6.15 million people (-12%) in the first half of 2024. The average revenue of a single store declined. After the number of participating control branches increased, off-season revenue was not fully released, and off-season rent, staff wages, etc. were fixed expenses; in addition, the company's employee equity incentive plan increased by 26.91 million yuan compared to the same period last year, leading to a decline in profits in the first half of the year.

Profit forecast and investment rating: Considering the impact of the macroeconomic environment on the industry, we have adjusted the profit forecast. The company's revenue for 2024-2026 is 11.5 billion yuan, 13.7 billion yuan, and 16.5 billion yuan, respectively, up 5%, 20% year on year; net profit to mother is 0.705 billion yuan, 0.915 billion yuan, and 1.197 billion yuan, respectively, up 39%, 30%, and 31% year on year; PE 19 times, 15 times, and 11 times, respectively. The company is a leading health examination industry and preventive medicine platform-based enterprise. It strengthens its competitive advantage by deepening digital intelligence capabilities and launching innovative products. Maintain a “buy” rating.

Risk warning: risk of industry demand falling short of expectations; risk of refining operations falling short of expectations; risk of organizational structure changes falling short of expectations; risk of medical disputes; risk of impairment of goodwill.