Introduction to this report:

The company's next-generation WineX products enable high-quality hospital development through digital transformation and improve delivery efficiency “ready to use from the factory”. The revenue growth rate of the innovative business was relatively rapid and losses were reduced significantly. Combined with cost savings, performance increased significantly.

Key points of investment:

Maintain the increase rating and maintain the target price of $10.37. Maintain the 2024-2025 EPS forecast of 0.25/0.36 yuan, increase by 50/ 44%, and add a 29% forecast for 2026 EPS of 0.46 yuan. The target price of 10.37 yuan was maintained, and the rating for increasing holdings was given.

Net profit due to 2024H1 increased 82% year over year, and the expense ratio declined significantly during the period. 2024H1's revenue of 1.22 billion yuan increased 2.7% year over year, and healthcare informatization fell 2.1% to 85%. Among them, sales of core products, software and technical services increased 1.8% to 74%, hardware sales fell 21% to 12%, and Internet healthcare increased 44% to 15%. Net profit to mother of 0.03 billion yuan increased by 82%. Sales/management/R&D expense ratios were 13.64/8.00/ 11.23%, down 6.90/0.91/3.06pct, respectively. Accrued impairment increased by 12% by 0.084 billion yuan. Net operating cash flow-0.085 billion yuan reduced outflow by 70%. Contract assets of 2.4 billion yuan increased 2.5%.

WineX products enable high-quality hospital development and improve delivery efficiency “ready to use from the factory”.

As of 2024H1, the company has accumulated hundreds of WineX users across the country, and continues to set a digital medical benchmark in different business fields and regions. Through continuous improvement of delivery tools, deepening knowledge templates, etc., a new WineX “ready to use” delivery model is realized, product content value is implemented more efficiently on the customer side, and delivery efficiency is effectively improved. 2024H1 added more than 20 million-level projects in smart hospitals, medical communities/medical consortia, primary health care, etc.

AI products such as WineX Copilot Medical Record Quality Control Assistant have been implemented in several projects.

The cloud medicine, cloud medicine, and cloud insurance businesses progressed steadily, and the overall innovative business reduced losses by 48% year on year. (1) In the first half of the year, “Cloud Medicine” reached a maximum of 1.2 billion daily HTTP visits to the C-side business, and the number of monthly active users exceeded 30 million. Nari Co., Ltd. will continue to enhance the depth and breadth of Internet medical services and expand the direction of C-side operations based on physical hospitals. (2) “Cloud Medicine” focuses on developing insurance and health entitlement card businesses and continuously improving operational service capabilities. While advancing the proposed share exchange, merger and restructuring, Huanyao Weining and Beijing Global Medical Rescue Co., Ltd., the two sides are actively expanding business-level cooperation to further enrich insurance services.

(3) “Cloud Insurance” Weining Technology signed a contract of 0.126 billion yuan in the first half of the year, an increase of about 60% over the previous year. On the basis of protecting the core business, it gradually reduced losses by reducing costs and expenses and actively implementing commercial insurance data sharing services to innovate the business. (4) 2024H1's innovative business revenue of 0.28 billion yuan increased 78% year over year, and net profit -0.076 billion yuan decreased 48% year over year.

Risk warning: New business developments fall short of expectations, and competition increases risk.