Incident Overview

On October 24, the company released its 2024 three-quarter report: operating income of 3.606 billion yuan (+7.85%) for the first three quarters of 2024, net profit to mother of -0.212 billion yuan (+4.59%), net non-net profit of -0.22 billion yuan (+37.20%), net operating cash flow of 0.624 billion yuan (-9.50%) for the first three quarters of 2024. 2024Q3's operating income was 1.186 billion yuan (+4.58%), net profit to mother -0.039 billion yuan (2023Q3 was -0.06 million yuan), after deducting non-net profit of -0.081 billion yuan (+14.85%).

Revenue growth is steady. The company's revenue growth rate in the first three quarters of 2024 was 7.85%, and the Q3 revenue growth rate was 4.58%, maintaining a positive growth trend, indicating that the overall operation of the hospital continued to improve.

Profitability is generally stable. The gross margin for the first three quarters of 2024 was 9.19% (+0.35pct), and the 2024Q3 gross margin was 8.58% (-2.34pct). Management fee rates and financial expense ratios have declined markedly. The total 2024Q3 sales/management/R&D/finance rate was -2.49pct year-on-year, +0.32pct month-on-month, of which the 2024Q3 management expense ratio was 11.53% (-1.12pct), achieving a continuous year-on-year decline in the first three quarters of 2024, indicating that the company's operating efficiency continued to improve and refined operation effects were evident; the financial expense ratio was 3.50% (-1.25pct), mainly due to the company increasing debt repayment; the sales expense ratio was 0.64% (-0.06pct year on year), which we think is central hospital and high An inevitable result of the continued increase in the reputation and popularity of the new hospital; the R&D cost rate was 0.15% (-0.06pct), mainly due to the influence of the company's optimization of the R&D personnel structure. The deducted non-net interest rate was stable, and the 2024Q3 deducted non-net interest rate was -6.80% (+1.55pct year over year).

International cooperation continues to be deepened, and specialist layout continues to be optimized

On September 25, 2024, International Medicine and Korea's CHA Medical Group held a strategic cooperation agreement signing ceremony and jointly established the first referral center in China. This cooperation will greatly enhance international medicine's multinational medical service capabilities. Since starting cooperation with Miaoyou Healthcare of the United States in December 2021, the company has helped improve diagnosis and treatment capabilities in clinical, scientific research, education, etc.

In terms of specialist development layout, the central hospital is actively expanding service areas, adding a comprehensive department of traditional Chinese medicine, a second department of comprehensive rehabilitation, a second hemodialysis department, a department of orthopedic spine diagnosis and treatment, a department of integrated Chinese and Western medicine oncology, and a neuroprosthetic department (the first independent clinical department specializing in neuroprosthetics in a third-level general hospital in China). The review of the top three high-tech hospitals is progressing steadily, refined management has been increased, and the efficiency of hospital management has been optimized and improved.

Profit forecasting

We expect the company's revenue for 2024-2026 to be 5.054/5.666/6.329 billion yuan, respectively, and net profit to mother of -0.255/0.002/0.185 billion yuan, respectively. The PS corresponding to the current latest closing price is 2.43/2.17/1.94 times, respectively, maintaining a “buy” rating.

Risk warning:

Health insurance fee controls are getting stricter, and the number of hospitalizations is not climbing as fast as expected.