Incidents:
American Health released its 2023 annual report on April 25: the company achieved revenue of 10.9 billion yuan (+26%, year-on-year caliber, same below); net profit to mother of 506 million yuan (+190%), net loss to mother of 559 million yuan in 2022; net profit of 463 million yuan (+182%) after deducting non-return mother net loss of 567 million yuan in 2022, a significant year-on-year change of loss to profit in 2023.
American Health released its 2024 quarterly report on April 30: The company achieved revenue of 1.8 billion yuan (-15%), net profit attributable to mother of 287 million yuan (-67%), and net profit not attributable to mother - 302 million yuan (-72%). As of the end of the first quarter of 2024, the number of medical examination centers under the company was 596, of which 308 were controlled.
Investment highlights:
In 2023, the company's operations achieved sharp increases in volume and price and scale effects. Excluding the number of people tested for nucleic acid, the company received a total of 28.34 million visitors in 2023 (+13.0%), of which the holding medical examination center received 17.55 million visitors (+13.7%); the comprehensive customer unit price was 620.8 yuan, an increase of 11.2% over the previous year.
The scale effect was reflected in the gross profit margin of 42.79% in 2023, up 8.35pct year-on-year.
High base and high operating leverage attributes led to a year-on-year decline in results in the first quarter of 2024. The medical examination industry is affected by factors such as the determination of employee benefit budgets of enterprises and institutions and residents' medical examination habits. The first quarter was a low season for business; due to delayed demand and increased health, the off-season in the first quarter of 2023 was not easy; while in the first quarter of 2024, due to an increase in annual meetings of corporate customers and an increase in individual customer travel, customers who have signed up for an examination were delayed. Delays in inspection in the first quarter of 2024, compounded by the high base for the same period last year, led to a year-on-year decline in revenue. On the other hand, due to the high cost and cost rigidity of the medical examination business, the off-season business caused seasonal losses.
Customer-centered, product, service and marketing system upgrade. Product: Launched innovative products such as “Brain Ruijia”, “Lunar Mental Health”, and “Digestive Tract Motility Screening”. In December 2023, the company and partners such as the Institute of Brain-like Intelligence Science and Technology of Fudan University launched the “China Million People Brain Health Screening Program” to cooperate to build a Chinese brain big data platform to complete 3 million brain health screening tasks in 3 years. Service: Through full-coverage data feedback and analysis, we develop detailed medical operation implementation maps and customer service maps based on 17 customer key service touchpoints, and improve human efficiency on the basis of ensuring medical quality.
B-side business upgrade, set up a group inspection and development center, screen key customers to form a group large customer pool, develop a differentiated customer sales approach, control tripartite channels, focus on provincial and regional business opportunity reserves, coordinate national/cross-regional needs of big customers; build a comprehensive welfare solution management platform for B-side customers, integrating enterprise medical examination progress, report inquiries, and group health analysis, and connecting resources such as public hospital medical treatment, welfare platforms, green communication services, etc., to meet the diverse needs of enterprise customer health management. The Star CRM system has achieved 100% national coverage, achieved refined management of the entire marketing process, and focused on the three sales process indicators of urban usage activity, daily visits per capita, and business opportunity reserves. The C-side uses Meituan, Douyin, and Kuaishou channels to upgrade “American Selection” to accumulate private domain traffic, release collaborative revenue growth momentum between group package services and individual inspection services, and establish a closed-loop marketing system that “continuously imports traffic from the Group Inspection Community, and retains and converts traffic in the private domain”.
The company has unique image data for over 100 million people and structured health examination data for 200 million people, and carries out data asset registration work. The “Data Elements ×” Three-Year Action Plan (2024-2026) issued by the National Data Administration and other departments states “improving personal health data files, integrating data on medical examinations, medical treatment, disease control, etc., and releasing the value of health care data in an orderly manner.” The company responded positively and became one of the first 24 listed companies to list data assets.
Build a “new quality of productivity” with big data for physical examinations plus AI. The company cooperated with Huawei and Runda Medical to develop the AI health care robot “Health Xiaomei”, and further demonstrated the launch of AI accurate nutrition solutions, traditional Chinese medicine intelligent physical examination, liver health, and AI blood sugar specific management on the basis of existing stroke/brain cognition/coronary calcification points/pulmonary nodules/electrocardiography/breast ultrasound/fundus AI diagnosis, ultrasound AI quality control, and AI blood sugar management.
Profit forecast and investment rating: We have adjusted the profit forecast. We expect the company's revenue to be 12.6 billion yuan, 15.3 billion yuan, and 18.4 billion yuan respectively, up 16%, 22%, and 20% year on year; net profit to mother will be 852 million yuan, 1.25 billion yuan, and 1,535 billion yuan, respectively, up 69%, 47%, and 23% year on year; PE will be 20 times, 14 times, and 11 times, respectively. The company is a leading enterprise in the domestic preventive medicine circuit and is committed to upgrading to a leader in digital health management throughout the life cycle. Maintain a “buy” rating.
Risk warning: risk of industry demand falling short of expectations; risk of refining operations falling short of expectations; risk of organizational structure optimization falling short of expectations; risk of medical disputes; risk of impairment of goodwill.