Results grew steadily in the first three quarters of 2024. The planting business rapidly expanded in the first three quarters of 2024, and the company achieved revenue of 2.233 billion yuan (+2.21% year over year), net profit to mother 0.498 billion yuan (-2.63%), net profit after deducting non-return to mother 0.494 billion yuan (-0.47%), gross profit margin of 41.82% (-0.76pct), and net profit margin of 26.95% (-1.06pct). 2024Q3 achieved revenue of 0.823 billion yuan (+0.04%), net profit of 0.188 billion yuan (-9.1%), net profit after deducting non-return of 0.189 billion yuan (-7.37%), gross profit margin of 43.51% (-1.11pct), and net profit margin of 28.47% (-2.34pct). We are optimistic about the long-term development of the company and maintain the company's profit forecast. We expect the company's net profit to be 0.559/0.617/0.686 billion yuan in 2024-2026, and the PE corresponding to the current stock price is 41.7/37.8/33.9 times, maintaining a “buy” rating.

The decline in general hospital business is slowing down, and the number of outpatient clinics is growing steadily

The company adheres to the “General Hospital+Branch” model development. The construction and operation of all dandelion hospitals are good. In 2024, the company fissified from the Hangkou Chengxi Regional Group and left the Hangkou Future Science and Technology City Level 2 Regional Group, further improving the support capacity of the Regional General Hospital. In the first half of 2024, the company's three major headquarters (Hangkou Pinghai General Hospital, Hangkou Chengxi General Hospital, and Ningkou General Hospital) achieved revenue of 0.544 billion yuan (-5.98%) and net profit of 0.277 billion yuan (-7.16%).

In the first half of 2024, the company had 84 medical institutions with a business area of more than 0.25 million square meters and 3037 dental chairs. The number of dental clinics in the company reached 1.71 million (+8.2%).

Expense rates increased during the period

In the first three quarters of 2024, the company's sales expense ratio, management expense ratio, R&D expense ratio, and financial expense ratio were 1.15%, 8.97%, 1.84%, and 1.61%, respectively, +0.22pct, +0.15pct, -0.17pct, +0.52pct. 2024Q3 company sales expenses rate, management expense rate, R&D expense rate, and financial expense ratio were 1.43%, 7.9%, 2.2%, and 1.61%, respectively, +0.43pct, +0.19pct, + 0.45pct

Risk warning: medical risk, competitive risk, reputation risk, etc.