Incident: Global Healthcare released its 2024 semi-annual report. During the reporting period, the company achieved operating income of 6.543 billion yuan, -2.9% YoY; net profit to mother was 1.137 billion yuan, +3.7% YoY. ROE (annualized) was 13.94%, -1.35pct year over year.

Comprehensive medical business: Revenue structure optimization, significant cost reduction and efficiency increase. 2024H1's comprehensive medical business achieved revenue of 3.645 billion yuan, -2.0% year over year; realized net profit of 0.243 billion yuan, +9.9% year on year; medical institutions' comprehensive net profit margin was 5.69%, +0.53 pct year on year. By optimizing the revenue structure, effective medical revenue accounted for +3.0 pct year over year. The average number of days of hospitalization was -0.4 days, the number of outpatient emergency patients and discharges increased by 6.4% and 7.4%, respectively, and the bed usage rate increased to 88.9%, +0.5pct year on year, further improving operational efficiency. The cost of pharmaceuticals and consumables accounted for 2.9 pct of revenue year over year. Cost control has shown results, significantly increasing medical balances.

Specialty and health technology business: improving quality and efficiency, and further improving the health ecosystem. The specialty medical business has made significant progress in the fields of oncology, nephrology, ophthalmology, and traditional Chinese medicine. Among them, oncology services achieved revenue of 0.087 billion yuan, +12.0% year-on-year; nephrology services achieved revenue of 0.149 billion yuan, +9.5% year-on-year. The health technology business focuses on full-cycle management of medical equipment and smart medical care. In the first half of the year, the equipment management business revenue was 0.264 billion yuan, +423.4%. Through mergers and acquisitions and strategic cooperation, smart medical care actively built a global service system.

Financial services business: Optimization of financing costs and further expansion of interest spreads. 2024H1's financial services business achieved revenue of 2.346 billion yuan, -3.5% YoY; gross profit of 1.214 billion yuan, +6.1% YoY. The net spread was 2.86%, +15BP year over year, mainly due to a significant reduction in financing costs. Specifically, on the asset side: the average return on interest-bearing assets was 6.70%, -0.34pct year on year, mainly due to the decline in the financial leasing market and increased competition in the industry. Debt side: The average cost ratio of interest-bearing debt was 3.84%, -0.49pct year-on-year, mainly due to the gradual reduction in the impact of high-cost loans in overseas stock and active domestic financing cost control measures.

The quality of assets is stable, and the overall ability to offset risks is strong. As of the end of the reporting period, the company's total assets were $83.972 billion, +4.5% compared to the end of the previous year; of these, restricted deposits were $0.675 billion, compared to -2.3% at the end of the previous year. Net interest-bearing assets were $70.425 billion, up 4.6% from the end of the previous year. Non-performing assets were 0.694 billion yuan, and the non-performing asset ratio was 0.99%, +1BP compared to the end of the previous year. The provision coverage rate was 286.24%, +1.69pct compared to the end of the previous year. The company's total debt was 61.68 billion yuan, +2.8% compared to the end of the previous year; the balance ratio was 73.45%, -1.2pct at the end of the previous year. The overall balance and liability structure is good.

Investment advice: Global Healthcare excels in cost management control and operational efficiency improvement, and continues to support steady profit growth. The company's 2024-2026 revenue is expected to be +7.39%/+8.04%/+9.17% YoY; net profit to mother +4.44%/+4.91%/+8.19% YoY. EPS was 1.12/1.17/1.27 yuan/share, and PE corresponding to the closing price on September 17 was 3.48/3.32/3.07 times. Give it a “buy” rating.

Risk warning: downside risk in the financial leasing market, increased risk of industry competition, risk of deteriorating asset quality