Incident: The company announced its 2023 results: The company achieved revenue of $4,077 million (+27.6% YOY), net profit of $685 million (+42.1% YOY), adjusted net profit (excluding compensation expenses from shares, depreciation and amortization, and net exchange losses resulting from the acquisition of hospital assets) of $713 million (+17.5% YOY). Excluding the one-time impact of nucleic acid testing, the company's revenue/net profit/adjusted net profit were +34.0%/63.6%/31.1%, respectively.
Comment:
The hospital business maintained steady growth, and hospital acquisitions were relatively smooth: the company's hospital business grew steadily in '23, achieving revenue of 3.89 billion yuan, +28.5% year over year, excluding one-time impact of nucleic acid testing. Among them, outpatient and inpatient services reached 1,351/2,539 billion yuan respectively, +23.1/ 31.6% year on year. The company actively expanded diagnosis and treatment programs (especially oncology projects), diversified treatment methods, and continued improvement in surgical capabilities for complex conditions. The company acquired Yixing Haijia and Xi'an Chang'an Hospital in '23, and the integration was relatively smooth. According to the company's disclosure, Yixing Haijia Hospital's revenue for the consolidated period was +30.8%, and Xi'an Chang'an Hospital's revenue for the consolidated period was +28.9% year-on-year. Under the standardized power and management of the group, the revenue of the merger and acquisition hospital maintained rapid growth, and the integration was relatively smooth, and it is optimistic that it will further increase the company's net profit in 24 years.
Investment in the second phase of the project and acceptance of the new hospital is expected to contribute to a 24-year increase in performance: in terms of the company's existing hospitals, the second phase of the Shanxian Haijia Hospital project was put into use in July 2023, adding 500 new beds; the second phase of the Chongqing Haijia Hospital project was put into use in February 2023, adding 1,000 new beds; the second phase of the Chengwu Haijia Hospital project was put into use in January 2024, adding 350 additional beds. As the number of beds in the existing Phase II hospital project gradually climbed, it is expected to increase the company's 24-year performance. Kaiyuan Liberation Hospital Phase II, Hezhou Guangji Hospital Phase II, Chang'an Hospital Phase III Project, and Suzhou Yongding Hospital Phase II Project will gradually be launched, and we are optimistic about the company's future endogenous growth. Dezhou Hygeia Hospital passed the tertiary general hospital inspection in March 2024 and plans to have 1,000 beds. Wuxi Haijia Hospital and Changshu Haijia Hospital are expected to be gradually put into operation in 2025, and the hospitals built by the company are progressing steadily.
Profit forecast, valuation and rating: Considering that it will take some time for the gross margin of the company's newly built hospitals and M&A hospitals to reach the level of the company's mature hospitals, the 24-25 net profit to the mother was lowered to 9.00/1,135 billion yuan (down 10%/9% from the previous forecast), and the net profit returned to mother for 26 years was 140 billion yuan. EPS was 1.43/1.80/2.22 yuan respectively, and the corresponding PE was 21/16/13 times, respectively. The company's endogenous growth is stable, the second phase of the project continues to expand, the epitaxial merger and acquisition project is relatively smooth, performance growth is steady, and the “buy” rating is maintained.
Risk warning: medical accident risk; merger and acquisition expansion falls short of expectations; industry policy risks, etc.