Driven by multiple factors such as national policies, market demand, and digital technology, the digital transformation of global healthcare has gradually become a major trend in the development of the industry. According to GrandViewResearch data, the global digital healthcare market in 2022 was US$211 billion, and will increase to US$809.2 billion at a compound annual growth rate of 18.6% from 2023 to 2030. In this context, the future growth of the digital healthcare market is unquestionable.

Currently, in the financial reporting season, major Internet medical companies are announcing their results one after another. This probably just gave us a window to search for “dusty pearls” among the many “glass balls.”

Take Neusoft Xikang (09686), which released its financial report on March 20, as an example. At a time when Internet medical companies were generally losing money, the company used a significant improvement in core financial indicators to support the company's growth — in 2023, Neusoft Xikang achieved revenue of 537.7 million yuan, and net loss narrowed to 155 million yuan (net loss for the same period in 2022 was 243 million yuan), while gross margin increased 6.1 percent year-on-year to 30.6%.

Neusoft Xikang attributes the sharp increase in gross margin, a core financial indicator, to the company's focus on businesses with high strategic synergy and continuous optimization of the business structure. In fact, gross margin is the key to opening the door to analysis. Its sharp increase not only showed us the effectiveness of the company's strategy, but also made the outside world see more possibilities for the company to quickly overcome “break-even.”

From this perspective, through financial reports, we may be able to see more about Neusoft Xikang's growth genes.

First, replicative regional growth will further open up room for growth.

Established in 2011, Neusoft Xikang has built China's first cloud hospital platform with a city as an entrance, and established an urban cloud hospital platform business model that links local governments, medical institutions, patients, and insurance companies. Through this model, from cloud hospital platform services, to Internet medical services, health management services, and smart healthcare products, Neusoft Xikang has undoubtedly successfully built a borderless digital medical ecosystem, broken down medical “information silos”, and accelerated the transformation of the traditional medical treatment model to the Internet medical model.

This model was developed based on the company's cloud hospital platform. The cloud hospital platform is a cloud-based healthcare infrastructure that integrates technologies including mobile internet, cloud computing, and big data. These technologies make it possible to build functions in a modular manner, making the deployment of the cloud hospital platform model easier and faster, while retaining great flexibility to customize based on the city's special circumstances. Strong data integration, processing, and analysis capabilities have also encouraged Neusoft Xikang to have greater technical advantages than most of its peers, thereby creating its own unique competitive moat.

As we all know, cloud networks can quickly link to network resources, and have the characteristics of being “fast and broad”. Based on this, Neusoft Xikang's business was also able to rapidly expand across the country. During the reporting period, the company strengthened market cultivation in East China, North China, and South China, and the Neusoft Xikang City Cloud Hospital platform network was further expanded.

For example, by the end of December 2023, “Zhejiang Nursing” and “Zhejiang Nursing”, jointly promoted by Neusoft Xikang and the Zhejiang Provincial Health Commission, had achieved full coverage in 11 cities of Zhejiang Province within 1 year. More than 570 medical institutions were installed, and more than 120,000 home nursing services were provided, an increase of 295.6% over the same period last year. In addition to this, Neusoft Xikang has also expanded the development context of the cloud hospital network to places such as Jiangsu, Henan, and Shenyang.

According to the “replicability determines growth” development theory (that is, almost all commercial giants grow through replication), as Neusoft Xikang achieves regional “replicability” in terms of business layout, this development strategy will undoubtedly open up more market space for the company.

According to the latest financial report, as of December 31, 2023, the number of medical institutions connected to the company's platform was 36,000, including 2,610 hospitals and 33,000 primary health care institutions. During the period, the number of paid medical institutions was 491, an increase of 238.6% over the same period last year. As can be seen, as the business space continues to expand, from “point” to “surface”, it will also mean that Neusoft Xikang can use minimal effort to leverage maximum growth space, thereby promoting fissile growth in performance, and the leading edge will become more and more prominent.

Second, the business structure continues to be optimized to provide a steady stream of power for the company.

During the reporting period, in addition to achieving “replicability” in terms of business space, Neusoft Xikang also continuously optimized its business structure, focusing on the collaborative development of the “medical+nursing+health” service business, which had an obvious positive feedback effect on the company's subsequent development.

Specifically, in terms of cloud hospital platform services, cost reduction and efficiency strategies are implemented, product experience is continuously optimized through commercialization, digitalization, etc., and the functionality of products is continuously enhanced in combination with cutting-edge technologies such as artificial intelligence. In terms of Internet medical services and home care services, we will continue to build a new medical and health service system that integrates offline and offline, and manages the full cycle of processes before, during, and after the hospital. In terms of health management, we will continue to strengthen corporate health management operations to meet the diverse health needs of employees. In terms of smart healthcare products, we continue to strengthen product+service connections to provide enterprises and individuals with more comprehensive intelligent solutions.

Thanks to the above layout, Neusoft Xikang's major business distributions during the reporting period provided growth momentum for performance. According to financial data, in 2023, the company's cloud hospital platform services and smart healthcare products recorded revenue of 98 million yuan and 218 million yuan respectively; while Internet medical service revenue increased 14.3% year over year to 158 million yuan, and health management service revenue increased 17.6% year over year to 209 million yuan.

Among these, home care services, especially in the Internet medical service sector, are growing more rapidly, which in turn has allowed the outside world to fully see the strong growth momentum of Neusoft Xikang. Financial data revealed that in 2023, the company's home care services grew strongly, achieving revenue of 22.7 million yuan, an increase of 279.2% over the previous year. Meanwhile, during the reporting period, the number of home nursing services exceeded 150,000, an increase of 185.9% over the same period last year. Among them, the number of home nursing services in Zhejiang Province exceeded 120,000, an increase of 295.6% over the same period last year.

Needless to say, under the “silver hair economy,” home care services are a “fertile ground” for development. According to estimates, by around 2035, China's elderly population aged 60 and above will exceed 400 million, accounting for more than 30% of the total population. Peking University research shows that by 2030, there will be more than 77 million disabled elderly people in China. According to the international 3:1 allocation standard for disabled elderly people and caregivers, the corresponding workers will exceed 40 million to meet the needs. The counterpart behind this will inevitably be a trillion-level market and a large demand gap. The new model of the emerging “Internet+ Nursing Service” completes resource allocation more effectively and efficiently extends healthcare services to communities and families to meet the needs of more patients.

In this context, Neusoft Xikang, on the one hand, provides users with better home care services by fully understanding the home care needs of different groups of people and continuously innovating the content of home care services to provide richer and more diverse nursing needs; on the other hand, it continuously optimizes and optimizes the home care service process and service quality improvement. Under multiple layouts, the company also has sufficient advantages to anchor development dividends — by the end of 2023, its home medical services and nursing had covered 950 medical institutions across the country, and 69,000 nurses were enrolled in the platform.

In summary, whether in the comprehensive industry of Internet medical care or the segment of home care services, the market has sufficient momentum for development. Being among them, the accuracy of Neusoft Xikang's strategic layout and the efficiency of execution have also undoubtedly contributed to the company's performance becoming more and more certain, and it is worth looking at the front line. The sharp rise of more than 10% on the day the financial report was released is a good proof.