Forecast profit fell 73.5%-78.2% year over year
The company issued a performance forecast: The company expects to achieve net profit of 600-730 million yuan in 2023, a year-on-year decrease of 73.5%-78.2%; it is expected to achieve net profit of 345-425 million yuan without return to mother, a year-on-year decrease of 84.3%-87.3%. The performance of routine testing business is basically in line with our expectations.
Key points of interest
Reduced inspection requirements led to a decline in apparent profit. According to the announcement, net profit after deducting non-return mother fell 63.7%-67.7% year on year due to a decrease in inspection demand related to public health events; on the other hand, due to a decrease in inspection demand related to public health events, net profit after deducting from mother fell 9.8%-10.5% year on year, and net profit after deducting non-return mother fell 9.6%-10.4% year on year.
We estimate a month-on-month decline in net profit for the 4Q23 single quarter. According to our estimates, in the 4Q23 single quarter, the company achieved net profit of 0.24-154 million yuan, a year-on-month decrease of 91.8%-47.1%; in the 4Q23 single quarter, the company achieved net profit deducted from mother of 0.02-0.82 billion yuan, with a month-on-month range of -96.5% to +17.8%; by the end of the 3Q23 period, the net book value of the company's accounts receivable was 6.038 billion yuan (7.025 billion yuan at the end of 2022). We expect the decline in apparent profit in 4Q23 to be affected by a certain amount of deduction and depreciation of COVID-related assets sexual effects.
Revenue from routine medical examinations is growing steadily, and key disease areas are growing rapidly. According to the company's official account, 1-3Q23 achieved routine medical examination revenue of 5.891 billion yuan, an increase of 16.7% year on year. Among key disease areas, neurological and mental disease diagnosis business increased 34.4% year on year, infectious disease diagnosis business increased 51.3% year on year, genetic and rare disease diagnosis business increased 40.6% year on year, and cardiovascular and endocrine disease diagnosis business increased 30.4% year on year, all of which achieved relatively rapid development.
Profit forecasting and valuation
Considering the reduction in demand for public health related inspections and the decline in scale effects due to higher fixed costs for routine testing, we lowered our 2023/2024 profit forecast by 12.4%/9.0% to 683 million yuan/1,034 million yuan, and introduced a profit forecast of 1,291 billion yuan for 2025. The current stock price corresponding to the 2024/25 price-earnings ratio was 24.4/19.5 times, respectively, maintaining the industry rating. Simultaneously with the 2024 profit forecast reduction, the target price was reduced by 9.3% to 69.96 yuan. The corresponding 2024/25 price-earnings ratio was 31.7/25.4 times, respectively, implying 30.2% upward space.
risks
Competition in the industry has intensified; inspection and fee control has been strengthened.