Matters:
Recently, the company released its 2023 annual report and 2024 quarterly report. 2023 revenue of $1,313 million (+22.73%), net profit attributable to mother of $78 million (+23.31%), net profit of non-return to mother of $94 million (+79.74%). In 2024, Q1 achieved revenue of 337 million yuan (+7.89%), net profit attributable to mother of 0.3 million yuan (+35.29%), and net profit of non-return to mother of 32 million yuan (+32.23%).
Commentary:
Health services have fully resumed growth, core hospital revenue is steady, and profitability has remained basically stable. The company currently has 7 hospitals in operation, of which 5 are neurological specialist hospitals and 2 are general hospitals, including Beijing Sanbo's revenue of 505 million yuan (+29.4%), net interest rate of 11.6%; Chongqing Sanbo Changan's revenue of 298 million yuan (+0.5%), net interest rate of 7.1%; Chongqing Sanbo Jiangling's revenue of 219 million yuan (+15.6%), net interest rate of 11.3%; Fujian Sanbo's revenue of 111 million yuan (+3.5%), net interest rate 0.0.2%; Kunming Sanbo's revenue is 0.70 million yuan (-2.2%), with a net interest rate of 0.2% 5.3 million yuan. By business, in 2023, the company's medical service revenue was 1.06 billion yuan (+24.08%), accounting for 76.58% of revenue; pharmaceutical sales revenue was 299 million yuan (+18.01%), accounting for 22.78% of revenue.
New hospitals have been opened one after another, and the implementation of new production capacity is expected to further expand the company's medical scale. Beijing Sanbo is the flagship hospital of Sanbo Brain Group. The company's Beijing Dongba New Campus project is expected to be completed before the end of 2025. After the construction of the new hospital area is completed, the number of open beds in Beijing Sanbo is expected to increase from 254 to 480. In addition, Xi'an Sanbo Brain Hospital is expected to open in the fourth quarter of 2024; the new campus of Kunming Sanbo Brain Hospital is expected to complete construction and relocation in the first quarter of 2025; and Hunan Sanbo Brain Hospital is expected to open in the first quarter of 2025.
Actively explore and deepen university cooperation and participate in the regional biomedical industry layout. In 2024, the company cooperated with Tsinghua University to establish the “Tsinghua University (School of Biomedical Engineering) - Sanbo Neurocomputer Precision Medicine Joint Research Center”. Beijing Sanbo will provide 15 million yuan to support the construction. A strong partnership between Beijing Sanbo and Tsinghua University can establish a strong basic theoretical research base for the company's basic research in brain science. This cooperation is conducive to continuously improving the company's level of awareness of the pathogenesis of diseases and the level of diagnosis and treatment technology, further strengthening the company's advantages in brain scientific diagnosis, treatment, evaluation, etc., continuously expanding the company's industry influence and brand awareness, and promoting the company's sustainable development.
Investment advice: Based on the 2024 annual report and the company's quarterly report, we expect the company's revenue for 2024-2026 to be $1,465, 16.37, and $1,846 billion, respectively (prior forecasts for 24 and 25 were $1,374 million and $1,534 million), up 11.6%, 11.8%, and 12.7% year-on-year. Considering the continued progress of the company's hospital engineering projects under construction over the next three years, the company's net profit for 2024-2026 is expected to be 0.92, 1.03, and 116 million yuan, respectively (the previous forecast values were 0.79 million yuan and 75 million yuan for 24 and 25), up 17.6%, 12.5%, and 12.0% year-on-year. Maintain a “Recommended” rating.
Risk warning: 1. Price adjustments for medical services exceeded expectations; 2. The increase in bed usage fell short of expectations; 3. Risk of changes in health insurance policies, etc.