Key investment points

On November 28, the Shanghai Health Insurance Administration issued a document supporting the development of commercial health insurance throughout the process. The government will guide commercial insurance institutions to innovate and develop products, focus more on self-funded medical expenses not covered by basic health insurance, and promote “numerical” empowerment. The company will fully benefit from:

(1) The company has cooperated with commercial insurance for a long time. The “Good Doctor in American Year” innovative products in 2019 (human insurance), “tuberculosis” in 2022, the “worry-free examination” (public security) in 2024, and the “abnormal index review fund” (German insurance under the company's German insurance) are all in-depth medical examination+commercial insurance cooperation, forming a closed-loop management of the whole process. In April 2022, the company acquired Guangdong Desheng, a national insurance brokerage company, and built a digital health service platform of “professional medical examination+intelligent diagnosis+specialist diagnosis and treatment+insurance payment”, which not only enhances its own service quality and barriers, but also provides customers with high-quality insurance products.

(2) The company can customize standardized group insurance for enterprises, which has broad coverage and cost-effective service characteristics, can effectively reduce the medical risk expenses of enterprises, and small and medium-sized enterprises can also enjoy the same service model of large enterprises. In recent years, the company has cooperated with many small and medium-sized enterprises to customize a “medical examination+health management+insurance coverage” package service, which has effectively reduced the incidence rate and odds of serious illness among customers, effectively improved the health level of enterprise employees, and realized “insurance coverage+health care” value synergy.

(3) In the commercial insurance data industry chain, the company, as the data source, is the foundation for back-end data informatization and data operation. With the improvement of the commercial insurance system, the value of the company's data source will be further highlighted. The company has accumulated over 100 million images and 0.2 billion structured health data, and has formed the largest personal health data center in China. The company's massive data provides a rich basis for risk assessment for commercial insurance companies, which helps commercial insurance companies to more accurately determine the health status of policyholders and reduce underwriting costs.

The concentration of the medical examination industry continues to increase, and the company's business trend is improving. According to Tianyan inspection data, the number of cancellations of medical examination institutions in 2021-2024 exceeded the number of new ones, and the number of stores that have been cancelled since 2023 has increased markedly, making it more difficult for stores to continue to operate. As a result, industry concentration has accelerated and leaders have benefited; the company's customer unit prices have maintained positive growth, and the effects of cost reduction and efficiency are expected to continue to be shown in 2024Q4 and 2025.

Profit forecasting

We expect revenue for 2024-2026 to be 11.008/11.837/12.687 billion yuan, net profit to mother of 0.333/0.629/0.895 billion yuan, corresponding EPS 0.09/0.16/0.23 yuan/share, respectively, and corresponding PE 57.82/30.63/21.52 times, respectively.

Risk warning:

The improvement in refined management capabilities fell short of expectations; the economy affected the number of signed orders.