It is only when the tide recedes that it is known who is swimming naked.

On August 30, Jiu'an Medical (002432.SZ) released its financial report for the first half of 2023, showing that current revenue and net profit for the period were 2,283 million yuan and 786 million yuan respectively, a year-on-year decline of 90.19% and 94.84%, respectively.

Excluding the data for the first quarter, Jiu'an Medical's revenue and net profit for the second quarter were 788 million yuan and 185 million yuan respectively, down 94.16% and 403.78% from the previous year. The year-on-year decline was as high as 47.29% and 69.22%.

The main reason for the sharp decline in profit in the second quarter compared to the first quarter was that Jiu'an Medical calculated asset impairment losses of 308 million yuan in the second quarter. This was mainly related to expired kit inventory, etc.

After the COVID-19 antigen business has shrunk drastically, where is the next city for Jiu'an Medical is receiving market attention.

TradeWind01 (ID: TradeWind01) notes that for the first time, Jiu'an Medical listed its asset management business in parallel with its main business, the “IVD and household healthcare products field” and the “Internet medical field” in the main business of the semi-annual report.

At the August 30 results conference, investors have already inquired whether Jiu'an Medical is preparing to use the “asset management business” as its main business.

Wu Tong, director of Jiu'an Medical, did not respond positively to this; he only stated that an asset management department had been set up.

Jiu'an Medical's cash reserves are indeed strong. As of the end of June this year, the balance of cash and cash equivalents reached 3.107 billion yuan.

Invest or become a main business

Not surprisingly, Jiu'an Medical's performance has shrunk sharply compared to last year.

According to the financial report for the first half of 2023, Jiu'an Medical's current revenue and net profit for the period were 2,283 million yuan and 786 million yuan respectively, down 90.19% and 94.84% from the previous year, respectively.

Excluding data for the first quarter, Jiu'an Medical's revenue and net profit for the second quarter were 788 million yuan and 185 million yuan respectively, down 94.16% and 403.78% from the previous year. The year-on-year decline was as high as 47.29% and 69.22%.

Asset impairment losses directly washed away Jiu'an Medical's profits in the first half of this year.

In the first half of 2023, Jiu'an Medical calculated an asset impairment loss of 332 million yuan. This is approximately equal to the 322 million yuan asset impairment loss calculated for the full year of 2022, an increase of 27140.90% over the same period last year.

It is worth mentioning that Jiu'an Medical mainly carried out operations to accrue large impairment amounts in the second quarter.

In the first quarter of this year, the amount of asset impairment losses calculated by Jiu'an Medical Center was only 104 million yuan. Based on this estimate, in the second quarter, it calculated asset impairment losses of 308 million yuan in one go.

“This was mainly due to impairment of goods, assets related to kits, and goodwill related to eDevice during the reporting period.” Jiu'an Medical explained.

In the first half of 2023, the amount of inventory price reduction and contract performance cost impairment losses mainly related to COVID-19 antigen kits was 99 million yuan.

Although the impairment has had a certain impact on performance, Jiu'an Medical's “sideline” investment has brought considerable benefits. Investment income for the first half of 2023 reached 217 million yuan, accounting for 27.61% of the net profit of the parent group.

Specifically, Jiu'an Medical's investment income comes from the period of holding transactional financial assets and disposal of tradable financial assets and debt investments. Earnings for the first half of 2023 were 124 million yuan, 27 million yuan, and 65 million yuan, respectively.

According to rough estimates of Jiu'an Medical's tradable financial asset balance of 6.044 billion yuan and debt investment of 2,827 billion yuan at the beginning of 2023, trade wind (ID: TradeWind01), its yield for the first half of the year could reach 2.45%.

After excluding the impact of transactional financial assets during the same period, Jiu'an Medical's ROE could still reach 4.82%.

However, Jiu'an Medical seems to be more “fond” of investing.

According to Jiu'an Medical's plan, the next step is to use no more than 3 billion yuan of its own capital in securities investment, raising it to 6 billion yuan. The additional amount will mainly be used to invest in high-rated sovereign bonds.

“Further improve the efficiency of the use of own funds, increase the company's profits, and create greater benefits for the company and shareholders on the basis of ensuring normal operation and capital safety.” Jiu'an Medical said.

Trade Wind (ID: TradeWind01) notes that for the first time, in the “Report Period Business Overview” section of the semi-annual report, Jiu'an Medical listed its asset management business side by side with its main business “IVD and household healthcare products field” and “Internet medical field.”

“The company has set up an asset management department and hired professionals with extensive experience in the field of asset management.” Jiu'an Medical said, “The company has increased the scope of investment business, that is, it uses its own funds to carry out investment activities and investment management.”

According to Tianyan Survey, on July 25, 2023, the business scope of Jiu'an Medical did increase “investment activities, investment management, and non-residential real estate leasing with its own funds”.

At the August 30 results conference, investors also sought proof from Wu Tong, director of Jiu'an Medical, whether the investment would become the company's main business.

Wu Tong did not respond positively to this; he only indicated that an asset management department had been set up.

However, it is true that Jiu'an Medical “has money and nowhere to spend it”. As of the end of June this year, cash and cash equivalents were still as high as 3.107 billion yuan.

When will dividends be paid

Without COVID-19 antigen reagents, Jiu'an Medical's main business is truly burdensome.

In addition to “asset management,” which was first listed as the main business in the first half of 2023, Jiu'an Medical's business is mainly divided into two major segments: IVD, household healthcare products, and internet healthcare.

In the first half of 2023, 90% of the revenue of IVD and household healthcare products mainly came from reagents and thermometers under the independent brand iHealth series. During the same period, the series generated revenue of 2.144 billion yuan, a year-on-year decline of 90.70%.

Although the revenue of Internet medical products and services mainly involved in “diabetes management/care” under Jiu'an Medical increased by 96.14% in the first half of 2023, the scale is relatively limited, with current revenue of only 115 million yuan.

However, Jiu'an Medical is increasing its diabetes care business and plans to complete the goal of opening a total of about 600 care centers nationwide by 2025.

In June of this year, in response to investors' questions, Jiu'an Medical stated that currently it has established nursing centers in about 50 cities and more than 260 hospitals across the country.

“Currently, there are 97 partner hospitals that have introduced a payment model in China. According to statistics, the compliance of paying patients far exceeds that of patients with free management. After the payment expires, patients can still maintain a certain degree of self-management inertia, and measurement habits are better than patients under free management.” Jiu'an Medical pointed out.

However, how strongly patients actually are willing to pay is still urgently needed to be confirmed by more performance data from Jiu'an Medical. Achieving positive profits in the short term may still be a problem.

The net cash flow generated by Jiu'an Medical's operating activities due to the “ineffectiveness” of the main business is not optimistic. As of the end of June 2023, it was only 1,639 billion yuan, less than 10% of the net cash flow from operating activities for the same period last year.

Even so, Jiu'an Medical's stock price continued to rise.

At the close of trading on August 30, Jiu'an Medical Report was 37.61 yuan/share, an increase of 10%.

The key reason points to a share repurchase announcement issued by Jiu'an Medical on the same day.

Jiu'an Medical plans to repurchase 20 million shares at a price not exceeding 49 yuan/share. The share repurchased accounts for 4.20% of the total share capital, and the total repurchase capital is between 500 million yuan and 1 billion yuan.

Regarding the reason for the repurchase of shares this time, Liu Yi, chairman of Jiu'an Medical, pointed out at the performance conference that the current stock price deviates from its fundamentals.

“The company management believes that the stock price has deviated from the fundamentals of the company and carried out this stock repurchase in order to protect the company's value and shareholders' rights and interests.” Liu Yi said.

Compared with the historical peak of the average stock trading price of 90.04 yuan/share on April 21, 2022, the closing price of 37.61 yuan/share on August 30 shrunk markedly.

However, after the tide of the epidemic receded, it was also difficult for Jiu'an's medical fundamentals to return to the historic high of 26.315 billion yuan in revenue in 2022.

In addition to repurchases, it is also a question for the market why Jiu'an Healthcare, which has so much cash and is unable to find a business with more potential for growth, does not pay dividends to investors.

From 2020 to 2022, the total amount of cash dividends from Jiu'an Medical was only 1,524 billion yuan, yet its net profit to parent during the same period reached 17.181 billion yuan.

In August of this year, the Securities Regulatory Commission publicly stated that it supports mid-term dividends for listed companies.

“Investors will be able to share the performance dividends of listed companies earlier and more by guiding stable operating cash flow through methods such as mid-term dividends for listed companies.” The Securities Regulatory Commission pointed out.

According to public data, at present, no less than 49 listed companies have issued mid-term dividend plans.

The market continues to pay attention to when Jiu'an Medical plans to pay big dividends.