Key points of investment
The profit side grew rapidly, and cash flow continued to improve. In 2023, the company achieved revenue of 6.461 billion yuan, an increase of 1.75% year on year; net profit of 287 million yuan, up 28.02% year on year; net profit after deduction of 268 million yuan, an increase of 19.43% year on year; mainly affected by share payments in the same period last year. Net cash flow from operating activities was 791 million yuan, an increase of 33.82% over the previous year, mainly due to generally good sales repayments and a decrease in prepaid purchases. In Q4 2023, we achieved revenue of 1,638 billion yuan, down 1.57% year on year; net profit to mother was 41 million yuan, up 344.08% year on year; net profit after deduction was 21 million yuan, up 0.89% year on year. The company's performance is steady, and the profit side is growing rapidly.
Medical services: Operational efficiency continues to improve, and discipline construction is progressing steadily. 1) The revenue side is under pressure in the short term, and profitability continues to increase. In 2023, the company's medical service sector achieved revenue of 1,788 billion yuan, a year-on-year decrease of 3.90%. Among them: Oncology specialist hospitals were 873 million yuan, a year-on-year decrease of 4.76%; general hospitals were 915 million yuan. There were 1.02 million outpatient emergency visits (-5.56%) and 1991,000 outpatient visits (-0.45%) in hospitals throughout the year. Growth is expected to be pressured mainly by regional medical expansion and macroeconomic factors affecting the number of patients treated. In the same period, the gross profit margin was 12.93%, an increase of 3.35 percentage points over the same period last year. It is expected to be mainly due to continued efficiency improvements under refined operations. 2) Discipline construction is progressing steadily, making every effort to create the characteristics of combining traditional Chinese and Western medicine. ① Cancer hospitals: Gynecologic surgery, lymphomatology, hepatobiliary surgery, etc. were approved as the first batch of pilot units for standardized diagnosis and treatment quality control in the country. ② Baiyun Hospital: Passed the China Chest Pain Center's primary version to standard certification, and obtained Baiyun District Neonatal Treatment Center and Baiyun District Ankylosing Spondylitis Treatment Hospital. ③ Wudang Hospital: It has been pre-screened on site by the Provincial Chest Pain Alliance; it has passed the review of the National Capacity Building Project for the Prevention and Treatment of Pulmonary Embolism and Deep Vein Thrombosis. ④ The “Famous Medical Hall of the Jiangsu Provincial Hospital of Traditional Chinese Medicine” and the famous traditional Chinese medicine studio Guizhou Station were established. Experts strengthened the collaborative development of traditional Chinese and Western medicine through consultations, room inspections and academic lectures, etc., to build and train outstanding traditional Chinese medicine key teams for hospitals under the group, and gradually carry out diagnosis and treatment of the dominant diseases of traditional Chinese medicine.
Pharmaceutical manufacturing: Proprietary Chinese medicines are under pressure for a short period of time, and Chinese medicine tablets are released quickly. In 2023, the company's pharmaceutical manufacturing achieved revenue of 844 million yuan, an increase of 6.74% over the previous year, mainly due to a sharp increase in the Chinese medicine tablet business. 1) Proprietary Chinese medicine: The revenue end is affected by collection, and the amount of joint relief pills is steadily released. It achieved revenue of 320 million yuan, a year-on-year decrease of 14.23%. It is expected to be mainly affected by the collection of proprietary Chinese medicines. The company will continue to reduce the impact of collection through adjustments to market strategies and product structures inside and outside the hospital. Among them, the recognition of joint relief pills continued to increase, with annual sales exceeding 68 million yuan, an increase of 8% over the previous year. 2) Tongde Pharmaceutical: Continuous rapid release of tablets, precise control on the cost side. Tongde and its subsidiaries achieved revenue of $524 million, an increase of 25.85% over the previous year. In 2023, the company increased the development of the Chinese medicine tablet market and achieved a zero breakthrough in the Guangdong market. Jiangsu and Guizhou both added new customers; the cost side accurately predicted early stocking and controlled procurement costs.
Pharmaceutical distribution: the number of customers is growing steadily, and the supply chain is refined and controlled. In 2023, the company achieved revenue of 5.275 billion yuan from pharmaceutical distribution, which is basically the same as last year. ① The company continues to explore product potential, monitor sales of various types to reduce losses, and cooperate with hospitals to reduce the proportion of drugs and consumption. ② The number of customers from hospitals above the provincial level continues to increase, increase the number of varieties and sales scale in the OTC retail market by increasing suppliers, and strengthen service efforts for existing primary care institution customers. ③ The company has strengthened payment control and management. Cash flow is in a virtuous cycle, and the proportion of repayments in operating income remains at a high level.
Investment advice: We expect the company's revenue for 2024-2026 to be 74.65/81.61/8.852 billion yuan, net profit to mother of 3.79/4.43/505 billion yuan respectively, corresponding EPS of 0.19/0.23/0.26 yuan, respectively, and corresponding PE 19.0/16.2/14.2 times, respectively. The company is a medical leader in Guizhou Province. The entire industry chain has been developed and upgraded in collaboration, and its performance has grown steadily over the past few years. Maintain a “buy” rating.
Risk warning: Risk of medical service business growth falling short of expectations; risk of product sales falling short of expectations; risk of medical accidents, etc.