Incident: The company released its 2023 annual report, achieving annual revenue of 1.62 billion yuan, an increase of 5.8% year on year; realized net profit of 36.689 million yuan, a decrease of 13.9% year on year; realized net profit of 33.95 million yuan after deduction, a decrease of 27.4% year on year.
Revenue growth has resumed, and multiple factors have put pressure on profits in the short term. On the revenue side, the year-on-year growth rate of the company's revenue in the four quarters of 2023 was -24.7%, 12.1%, 26.3%, and 18.1%, respectively. Although objective factors had a certain impact on the release of industry orders in the second half of the year, the company's revenue showed a good recovery trend. On the profit side, the company's gross margin in 2023 was 47.0%, down 2.41 pp from the previous year; sales, management, and R&D expenses rates were 8.0% (+0.36pp), 12.8% (+0.47pp), and 15.3% (+1.06pp), respectively, mainly due to the fact that new Hi-HiS products are still in the early stages of promotion, delivery costs are high, and personnel remuneration increases. Furthermore, the company's credit and asset impairment losses amounted to 170 million yuan. These multiple factors put pressure on profit side performance in the short term.
Hi-HIS is entering a new stage of nationwide promotion, which is expected to accelerate the release of performance. During the reporting period, the Hi-HIS system was fully launched in the “Four Hospitals and Five Districts” of Taizhou Enze Medical Center. The project involved 262 sub-projects in 7 categories, including smart services, smart clinical practice, and smart management, which significantly improved the response speed of the business system and helped Taizhou Hospital pass the electronic medical record level 6 and connectivity maturity assessment 5B. The launch of the benchmark project means that the company has formed a complete set of systematic and replicable Hi-HIS customized development and efficient deployment mechanisms to push Hi-HIS towards agile delivery. By the end of 2023, the Hi-HIS system (excluding partial module procurement) had been applied by more than 40 hospital customers across the country, and 22 new orders were signed throughout the year. The order amount increased dramatically over the same period last year, which is expected to accelerate the release of the company's performance in the future.
The collaboration with Philips is further deepening, and the leading edge is consolidated in multiple ways. In the past, China's medical IT landscape was scattered, but after the difficult situation, small and medium-sized manufacturers began to clear up at an accelerated pace, and the competitive pattern is expected to improve markedly after the big wave. At the same time, the cooperation process between the company and Philips has been accelerated. CareSync, a next-generation electronic medical record product, has been officially released and pre-sales work has begun with many hospitals. Recently, the company and Philips have further reached strategic in-depth cooperation in “medical technology support”, and will continue to promote the integration of “self-developed products+Philips cooperative products”.
In addition, the company and the Zhejiang University Computer Innovation Technology Research Institute launched the Huikang-Qizhen Big Model and Huiyi GPT to continuously iteratively enhance AI+ medical capabilities and continuously enhance overall competitiveness.
Profit forecast and investment advice: With the recovery in demand from downstream medical systems, the company's next-generation Hi-HIS system has entered the agile delivery stage. It is expected that it will be quickly and fully rolled out in the future, boosting the release of performance every quarter. The company's 2024-2026 EPS is expected to be 0.13 yuan, 0.18 yuan, and 0.25 yuan respectively, giving 2024 40 times PE and a target price of 5.20 yuan, maintaining a “buy” rating.
Risk warning: Risks such as policy promotion falling short of expectations; insufficient momentum for hospital endogenous reforms; progress in new product development falling short of expectations; and increased industry competition.