Incidents:

Overall performance was in line with expectations, and profit levels improved

The company released its 2024 mid-year report. 2024H1 achieved revenue of 4.976 billion yuan, a year-on-year decrease of 2.7%, and net profit of 0.434 billion yuan, an increase of 9.0% year-on-year. The overall performance was in line with expectations.

Comment:

Affected by health insurance, hospital business declined slightly

As of 2024 H1, the company managed and operated 127 medical institutions in 10 provinces and cities in China, including 13 level-III hospitals and 23 level-II hospitals. The turnover of the H1 Hospital business segment in 2024 was 4.6 billion yuan, a slight decrease of 3.0% over the previous year. Among them, outpatient revenue was 1.895 billion yuan, up 1.7% year on year, and inpatient business revenue was 2.705 billion yuan, down 6.1% year on year. The turnover of other businesses was RMB 0.376 billion, up 1.8% year over year.

The number of treatments at our own hospitals has increased, and all have declined

The number of H1 diagnoses and treatments increased in 2024. The number of outpatient visits and hospitalizations in our own hospitals was about 5.05 million and 280,000 respectively, up 3.5% and 3.0% respectively over the same period last year. Affected by the difference in medical insurance settlement in two years, the average income of outpatients and hospitalizations declined, falling 2.0% and 8.8%, respectively.

Improve quality and efficiency, and drastically reduce financial costs

The company strives to reduce the impact of the decline in sub-average revenue on hospital business profits by improving quality and efficiency. The gross profit of the 2024H1 hospital business segment was 0.923 billion yuan, with a gross profit margin of 20.1%. The total financial expenses of the 2024H1 company were 39.84 million yuan, a year-on-year decrease of 34.8%, mainly due to the reduction in loan interest rates when replacing overseas loans with RMB loans. The income tax was about 0.116 billion yuan, a decrease of 16.3% over the previous year, mainly due to the decline in domestic taxable income.

Profit forecasting

China Resources Medical is the main platform for China Resources Group's layout in the healthcare field, and has become a leading comprehensive medical group of central enterprises. With the implementation of asset mergers and acquisitions, the company's business scale and profitability are expected to continue to increase through continuous deepening and gradual elimination of irregular impacts through integrated fine management. Considering that the company completed the acquisition of Liaojian and Jiangneng Group in 2023, we raised the company's 2024-2026 revenue to 10.52, 11.084, and 11.746 billion yuan, with year-on-year increases of 4.08%, 5.37%, and 5.97% respectively; net profit attributable to shareholders of listed companies was 0.744, 0.782, and 0.817 billion yuan respectively, with year-on-year increases of 188.90%, 5.02%, and 4.50%, respectively.

The company is leading in market size and has good growth potential, maintaining a “buy” rating.

Risk warning: endogenous growth falls short of expectations; health insurance policy risks; increasing competitive environment