Incidents:
On March 27, Gushengtang announced its annual results: In 2023, the company achieved revenue of 2,323 million yuan (+43.0%, year-on-year scale, same below) and adjusted net profit of 305 million yuan (+53.6%).
On March 28, Gushengtang issued a disclosure statement the next day: The company spent HK$21.84 million on the same day to repurchase 49,400 shares, accounting for about 0.20% of the total share capital.
Investment highlights:
The company achieved significant growth in 2023. In terms of volume and price, the number of visits in 2023 was 4.3 million (+45.9%), the average cost was 541 yuan (-2.0%), the number of patients was 1.2 million (+36.2%), and the per capita consumption was 1,937 yuan (+5.0%). At the doctor level, the number of offline doctors in 2023 was 4,841, a net increase of 960 over the previous year; of these, there was a net increase of 220 to 542, and self-owned doctors contributed 705 million yuan (+100.5%), accounting for 34.60% of offline revenue. The endogenous growth of old stores was strong. The revenue of old stores in 2023 was 1,758 billion yuan, an increase of 35.3% year on year. If the adverse effects of the epidemic on the 2022 base period were restored, the year-on-year growth rate of old stores in 2023 was about 19.8%.
Further high-quality expansion of the company's business is expected in 2024. The company plans to add 10 to 15 new stores, 3 to 5 new cities, and develop 10 in-house formulations in 2024. On March 26, the company announced its intention to acquire 100% of Baozhongtang Singapore's shares, taking the first step in internationalization.
The company attaches importance to returns to investors, implements special dividends, and actively buys shares and cancels them. In 2023, the company spent about HK$42.92 million to repurchase and cancel 969,800 shares, and in the first quarter of 2024, the company continued to spend about HK$46.54 million to repurchase 1.0894 million shares. In 2023, the company paid a special dividend of HK$0.41 per share, with a dividend amount of approximately RMB 89.76 million.
Profit forecast and investment rating: The company's revenue for 2024-2026 is expected to be RMB 3.102 billion, RMB 4,048 billion, and RMB 5.248 billion, up 34%, 30% year on year; net profit to mother will be 341 million yuan, 477 million yuan and 650 million yuan respectively, up 35%, 40% and 36% year on year; adjusted net profit will be 411 million yuan, 538 million yuan and 701 million yuan respectively, up 35%, 31% and 30% year on year. The company is a leader in traditional Chinese medicine medical services, with strong cross-regional chain management capabilities and outstanding growth. Maintain a “buy” rating.
Risk warning: risk of business expansion falling short of expectations; risk of brain drain; risk of medical accidents; risk of increased competition in the industry; risk of fluctuating prices of Chinese medicine tablets.