As a listed company controlled by a central enterprise with healthcare as its main business, Global Healthcare (2666.HK), which has grown rapidly in recent years, has released huge performance breakthroughs in the specialty industry. According to the 2023 annual results announcement issued by Global Healthcare on March 27, the specialty and health industry business revenue surged 190.7% year on year to 244 million yuan, while net profit achieved a rapid increase of 271.8% to 32 million yuan. Among them, the equipment full-cycle management business achieved an energy level leap forward, contributing 243 million yuan in revenue for the full year of 2023, an increase of 241% over the same period of the previous year; net profit of 35 million yuan, an increase of 208% over the same period of the previous year.

According to the Zhitong Finance App, the company's specialty and industrial sectors have performed well, and it is worth looking forward to explosive growth in the future.

1. The 100 billion market has a broad blue ocean, and the integration of the central enterprise industry has an innate advantage

Take the full-cycle management of medical equipment, which was the first to achieve breakthroughs in performance, as an example. Currently, the domestic maintenance market exceeds 100 billion dollars and is showing a double-digit growth trend. In recent years, as the country continues to introduce various policies requiring high-quality development of public hospitals, the medical equipment full-cycle management service model has also been increasingly favored by customers. In recent years, the winning bid amount for domestic hospital equipment packaging and hosting has also maintained double-digit growth.

Further analysis shows that 70% of the current 100 billion maintenance market is still occupied by the original factory. Although third-party maintenance accounts for 30% of the share, maintenance companies present “small, scattered, and mixed” characteristics, service capabilities and service quality are uneven, and in the past three years, due to the rapidly changing external environment and lack of standardized internal management, many third party companies in the industry have faced survival difficulties, and there are opportunities for industry integration.

Especially for equipment maintenance in public hospitals, the requirements for high-quality development and compliance are even more urgent. The Zhitong Finance App learned that medical equipment, as the core asset of hospitals, is related to the quality of diagnosis and treatment and the level of service to patients, whether it is safe operation or full use of technical values. Therefore, specialized, high-quality, and cost-effective medical equipment full-cycle management services are an important guarantee and support for safe and efficient diagnosis and treatment.

However, as a state-owned enterprise, Global Healthcare can also provide standardized support in promoting cost reduction and efficiency in hospital equipment and promoting consensus on industry standards, and has first-mover management advantages.

The Zhitong Finance App also observed that the State Council recently issued the “Action Plan to Promote Large-scale Equipment Renewal and Consumer Goods Trade-in”, which mentions strengthening the construction of high-quality and efficient medical and health service systems, promoting the iterative upgrading of equipment and information technology facilities in medical and health institutions, and encouraging medical institutions that are in a position to do so to speed up the upgrading of medical equipment such as medical imaging, radiotherapy, telemedicine, and surgical robots. Promote the renovation and upgrading of medical institutions' wards and make up for shortcomings in the ward environment and facilities.

It can be seen that the full-cycle equipment management sector has a huge market size and a broad blue ocean. Among them, Global Healthcare, as a central enterprise, is bound to give full play to its unique advantages, and growth can be expected in the future.

2. Empowered by “hard and soft power”, the full-cycle management of equipment can be expected to explode

As a benchmark enterprise for central medical enterprises, Global Healthcare gives full play to its advantages, actively seizes integration opportunities in the third-party maintenance industry, and builds the core competitiveness of “efficient operation+specialized technology” to achieve the development vision of “a leader in the full life cycle management of medical equipment”.

As the company's industry integration strategy progresses steadily, the global medical equipment full-cycle management business is developing towards specialization, scale, systematization and maturity, accelerating the establishment of a leading brand in the central enterprise industry. As an important support for the company's health industry sector, the full-cycle equipment management business will achieve energy level leaps within 2023:

The market pattern/business layout expanded rapidly: During the reporting period, the company continued to accelerate the implementation of the industry integration strategy and successfully merged and acquired Kaisxuanda, a leading domestic medical equipment maintenance company, and Tuozhuang Healthcare, a leading company in the Shandong region. According to information, as a leading enterprise in the industry, Kaisxuanda's maintenance capabilities can cover mainstream medical imaging equipment as well as small and medium-sized equipment such as life first aid, respiratory anesthesia, and hemodialysis, etc., and the scope of services covers the whole country. Tuozhuang Medical is a leading enterprise in the third-party maintenance industry in Shandong, and its service radius can cover the entire region of Shandong Province. With the addition of Casexuanda and Tuozhuang Medical, Global Healthcare currently serves 720 customers and manages a total assets of nearly 20 billion yuan. Among them, the number of tertiary hospital customers is 313, with total management assets of about 9 billion yuan; there are about 400 customers from level II hospitals and below, with total management assets of about 11 billion yuan.

Improve core competences/advantages: The company has established stable cooperative relationships with more than 10 well-known domestic and foreign equipment manufacturers, including GE, Philips, and Siemens, and has actively cooperated in various areas such as after-sales service, spare parts supply, talent training and academic exchanges. Currently, all service entities under the company are in the national high-tech industry. The team of professional equipment maintenance engineers has more than 700 people, the equipment self-repair coverage rate has reached more than 85%, and the 3-day repair rate is over 90%. With the improvement of the company's core capabilities and the accelerated integration of external resource advantages, it has laid a solid foundation for the company to become a leader in industry segmentation.

According to the Zhitong Finance App analysis, the above energy level achievements are inseparable from the company's support for the hard power and soft power of the companies it has acquired.

First, in terms of strategic choices for mergers and acquisitions, the companies that Global Healthcare chose to invest in have a common denominator, that is, all companies have a high degree of compatibility with Global Healthcare's own resource capabilities, that is, they can achieve a win-win situation in terms of their existing financial and general hospital business resources. The company's management pointed out at the performance meeting that after joining Global Healthcare, the invested companies will not only be able to maintain good performance, but under the common expectations and confidence of both parties, these companies will also achieve higher quality and faster development in related industries.

From a hard power perspective, in addition to the financial business foundation of listed companies helping the development of the industry, what is more important is that Global Healthcare can provide support for upstream and downstream resources and benefit sharing in the healthcare industry chain based on its existing “healthcare+finance” business. According to information, although Kaisxuanda (an equipment maintenance company), which was merged and added in August last year, is a top enterprise in the industry, it still faces multiple development bottlenecks such as spare parts supply issues from manufacturers, access to original technical training resources, and capital requirements for expansion. However, as a central enterprise healthcare group with an advantage in scale, Global Healthcare has significant advantages in terms of financial support, deepening and expanding manufacturer relationships, and industrial chain resources, which can effectively help Casexuanda break through development bottlenecks and enhance its core capabilities.

Soft power comes from post-investment management experience. Over the past four years, the reform and development results of general hospitals within the global healthcare system have proven that they have strong integration and genes leading high-quality development in terms of strategic management, cultural consensus, and organizational efficiency. According to the management presentation at the performance conference, after joining its full-cycle equipment business line, Kaisxuanda has formed a two-tier structure of a “headquarters competency center” and an “industrial company competency center”. The management model has been optimized, and operational efficiency has also been improved. Through management methods such as strategy, finance, human resources management, and digital empowerment, it has enabled the high-quality development of invested enterprises. At the same time, the company will also grow together with the investee companies, generating “1+1>2” or even more value growth while achieving resource sharing, complementary advantages, and mutual benefit and win-win situation between the two parties.

According to the Zhitong Finance App analysis, comparable companies in the same industry can refer to Agiliti, an important service provider in the US healthcare industry. Over the past eight years, Agiliti has provided medical device management and service solutions to help healthcare providers reduce costs, improve operational efficiency, and support optimal patient treatment results. Agiliti's model includes both leasing and equipment maintenance, and is very similar in business to the rest of the world, and Agiliti was valued 30-50 times PE by the market in the past. I believe that as global healthcare's industrial business continues to grow rapidly in the future, it will also open up growth boundaries and drive an increase in the overall valuation of listed companies.

3. Accelerate the overall layout of specialties and industries, and continue to open up growth boundaries

The results announcement shows that in 2023, Global Healthcare will progress to varying degrees in all segments of the specialty and industry.

In terms of nephrology specialists, Global Healthcare relies on the development soil of hospital groups to create core services for chronic disease management, integration of traditional Chinese and Western medicine, dialysis quality control, and pathway management, and establish a regional 1+N business collaboration layout for nephrology specialist hospitals and hemodialysis centers. Up to now, the company has empowered 21 hospitals internally to promote a full-course nephropathy management model, achieving revenue of 270 million yuan in the comprehensive medical business sector, an increase of 18.9% over the previous year; externally, it has completed mergers and acquisitions of Bishi University (Chengdu) Nephrology Specialist Hospital and Haiyang Senzhikang Hospital (hemodialysis center), and continues to promote mergers and acquisitions of other specialist hospitals and hemodialysis centers. According to reports, a related layout will also be implemented in 2024.

In terms of oncology, Global Healthcare and Maisheng Medical Group, a leading international miniaturized proton diagnosis and treatment equipment company, jointly established the precision oncology service company “Global Maisheng” to accelerate the construction of a leading domestic accurate cancer diagnosis and treatment business system and an intelligent accurate cancer diagnosis and treatment service platform through the “medical equipment, software+light assets+heavy assets” business model. Currently, the amount of revenue from cancer in comprehensive medical care is 159 million yuan, an increase of 14.8% over the previous year.

In terms of ophthalmology, the Zhitong Finance App recently discovered that in April, Global Healthcare signed a cooperation framework agreement with the Jinan Huaiyin District People's Government and the Jinan International Medical Center Management Committee. All parties will jointly push for the opening and operation of the Scherming Optometry Hospital project as soon as possible. In fact, as early as May 2023, Global Healthcare signed a strategic investment agreement for Scherming Eye Hospital affiliated to Shandong University of Traditional Chinese Medicine. The Zhitong Finance App believes that in the future, Global Healthcare will give full play to the management experience, resource advantages and financial advantages of central enterprise healthcare groups, build Scherming Vision Ophthalmology Hospital into a domestic benchmark hospital for integrated traditional Chinese and Western ophthalmology at Jinan International Medical Center, and become a highland and regional medical center with exemplary leading effects to promote the strengthening, improvement and expansion of ophthalmology hospitals.

It is worth mentioning that in the health industry, in addition to the full-cycle equipment business, the company is also actively expanding the medical digital technology business.

According to reports, the medical digital technology business is divided into two directions: medical digitization and medical care digitalization. Digitalization of healthcare is the creation of a smart hospital product system that integrates online and offline in front of the hospital, in-hospital, and online and offline, to form autonomous and controllable digital support capabilities for operation and management. Digitalization of medical care is the Internet field that lays out the health care industry and runs the smart home medical care model.

The company acquired Aotori Softcom in early 2024, which is an important step in expanding the digitalization of healthcare. As a leading smart health and pension enterprise in China, Qingniao Softcom's national business layout covers more than a dozen provinces, serves more than 300 smart pension platforms in districts and counties, and has intelligently transformed more than 40,000 family pension beds. The company said that in the future, it hopes to use the merger and acquisition of Blue Bird Softcom to build a smart medical care service system integrating home, community, and institution, empower hospitals internally, build brands externally, and become an independent industrial line under listed companies that can unleash greater value.

4. The three major sectors collaborate and resonate, and combine industry and finance to build a high business moat

The strategic layout for the collaborative development of the three sectors is a significant advantage that distinguishes Global Healthcare from other similar companies. According to reports, Global Healthcare is committed to developing into a healthcare enterprise with financial service capabilities, specialty medical characteristics, and differentiated industry-side business advantages, building a 1+N “platform structure for large listed companies”, gradually fully releasing the value of its various business segments and assets, and continuing to open up growth boundaries. This is a high-quality development strategy that the world has always determined to implement, and it is also a value support for building a trustworthy world-class healthcare enterprise.

According to the analysis of the Zhitong Finance App, the three major sectors of global healthcare are not independent of each other, but can organically integrate and leverage each other to achieve efficient resonance for growth.

As a source of profit for steady growth, the financial business is the “ballast stone” for the company's continuous development, providing a steady stream of cash flow for the comprehensive medical and specialist industries. Currently, the global medical finance sector has formed a new pattern with two AAA corporate credit rating entities. The financial sector can provide great help to specialists and industrial units in terms of capital investment and mergers and acquisitions, and resource sharing and benefit sharing upstream and downstream of the industrial chain. In terms of performance, the financial business achieved revenue of 5.882 billion yuan in 2023, an increase of 2.8%; net profit of 1,745 billion yuan, an increase of 2.1%, and still maintained steady and safe growth.

The goal of the comprehensive medical business is to maintain healthy rolling development, become a model for quality medical care, create a competitive advantage for central enterprises with group control and enhanced specialization, and improve the operating efficiency of state-owned enterprises and hospitals. On this basis, these general hospitals can also be used as R&D and training centers for specialist medical care, transformation pools for incubation projects, and basic resource and practice sharing centers for industrial units, helping listed companies build a second growth curve for the specialty and health industry. In terms of performance, the comprehensive medical business achieved revenue of 7.634 billion yuan in 2023, an increase of 20.5%; net profit of 421 million yuan, an increase of 14.7%, mainly due to the increase in the business volume of its own hospitals and the effectiveness of group management and control.

It is reported that in the future, Global Healthcare will continue to cultivate and consolidate core capabilities, continuously gather superior internal and external resources, closely integrate contextual development with epitaxial expansion, build replicable operational capabilities and influential industry brands in the health industry, and promote the high-quality development of central enterprise healthcare groups.

Summarize

Taken together, Global Healthcare has built a business model that integrates “healthcare industry+financial advantage”. As the overall development strategy continues to be implemented, supported by multiple advantages such as stable fundamentals and sufficient funding, Global Healthcare has successfully built a strong and wide moat for its long-term high-quality development. Looking forward to the future, Global Healthcare will continue to make big strides through the “epitaxial endogenous” two-wheel drive approach. With the expansion of the company's own business and the implementation of industrial mergers and acquisitions, explosive growth can be expected in the future, and sustainable rapid growth in this industry direction will also drive the overall valuation of Global Healthcare to increase and promote value discovery and revaluation of listed companies.

Furthermore, while building a model for high-quality development of listed healthcare central enterprises and serving a “healthy China” strategy, Global Healthcare also pays great attention to ESG practices and integrates global sustainable development goals into the company's daily management and operation. In 2023, Global Healthcare ranked 62nd in the “China ESG Listed Companies Pioneer 100” list, and actively became one of the first batch of ISSB International Sustainable Development Accounting Compliance Partners in China, actively fulfilling social responsibilities through practical actions and promoting the leapfrog growth of listed companies with leading overall value.

It should be emphasized that the company has stable dividends all year round, with a dividend rate of 30% and a dividend ratio of over 7%. As the company's high-quality and efficient growth path becomes more clear, Global Healthcare, which combines multiple concepts such as “China Special Valuation” and “High Interest Stocks,” is expected to enjoy higher valuation premiums as performance continues to be released. The company's management also revealed at the performance meeting that it will continue to strengthen the systematization of market value management on the basis of making every effort to promote high-quality business development to enhance the market recognition and value realization of listed companies.