Performance grew steadily in the first half of 2024, and the number of overseas egg retrieval cycles grew rapidly. In the first half of 2024, the company achieved revenue of 1.444 billion yuan (+8.2% year over year, all the following are year-on-year scales), adjusted net profit of 0.26 billion yuan (+1.8%), gross profit margin of 40.38% (-1.93pct), and a net profit margin of 13.18% (-3.6pct).

We are optimistic about the long-term development of the company and maintain the company's profit forecast. The net profit for 2024-2026 is 0.387/0.463/0.538 billion yuan, and the current stock price corresponds to PE of 14.5/12.1/10.4 times. Considering the continued increase in the company's profitability, high barriers to industry competition, and the new Shenzhen campus is expected to open and operate, maintaining a “buy” rating.

Assisted reproductive services grew steadily, and the Greater Bay Area business revenue continued to grow rapidly in the first half of 2024, the company's ARS business revenue was 0.778 billion yuan (+9.58%), management services revenue was 0.287 billion yuan (+1.06%), obstetrics services revenue was 0.116 billion yuan (+13.73%), and other medical services revenue was 0.202 billion yuan (+6.88%). Divided by region, revenue in Chengdu was 0.883 billion yuan (+8.6%), thanks to ARS business growth in Chengdu (+4%), thanks to the increase in VIP business (higher unit price) in Bisheng Hospital from 16.3% in the first half of 2023 to 19.5% in the same period in 2024, and obstetrics, gynecology, and pediatric revenue increased 14.9% year-on-year, the Greater Bay Area revenue 0.242 billion yuan (+10.5%), and Kunming and Wuhan business revenue 0.13 billion yuan (-6.6%). Overseas business revenue 0.391 billion yuan (+11.5%).

The number of egg retrieval cycles continues to grow, and epitaxial development progresses smoothly

In the first half of 2024, the number of egg retrieval cycles in the company reached 0.0151 million (+2.72%), the number of egg retrieval cycles in the Chengdu region reached 7571 (-4.67%), and the number of egg retrieval cycles in the Greater Bay Area business reached 3022 (+6.67%). The number of egg retrieval cycles in the Greater Bay Area business continued to grow rapidly, mainly due to the increase in the number of patients and the share of the VIP business with a higher unit price in Shenzhen and Hong Kong, China increased from 7.2% in the first half of 2023 At 7.7% in the same period in 2024, the number of egg retrieval cycles in overseas regions reached 2,325 (+25.27%). Mainly due to HRCMedical's vigorous promotion of egg freezing business and the resumption of international business, Laos began operations in August 2023, and the number of egg retrievals in Kunming and Wuhan reached 2,133 (+1.57%). In July 2024, the company completed the acquisition and subscription of 30% of the shares in “Morula”. After the transaction was completed, the company became its largest strategic investor. Morula is Indonesia's largest assisted reproductive health service group and currently has 10 IVF clinics across Indonesia.

Risk warning: risk of policy changes, risk of increased market competition, risk of excessive valuation of mergers and acquisitions in the primary market.