Huaan Securities is optimistic about Perfect Healthcare (01830)'s competitiveness in the medical and aesthetic market and its ability to expand overseas.
The Zhitong Finance App learned that Huaan Securities released a research report saying that it gave Perfect Healthcare (01830) a “increase in holdings” rating, and is optimistic about its competitiveness in the medical and aesthetic market and its ability to expand overseas. It is expected that FY2024-26 will achieve operating income of HK$16.75/20.06 billion HK$2,387 million and net profit of HK$4.03/4.94/606 million. The company is one of the largest one-stop “medical health+medical beauty” service providers in the Greater Bay Area. It has excellent operating capacity and a clear development strategy. It explores business growth potential through the “medical aesthetic+medical care” dual-core business development model, upgrades the service network, and establishes a leading position in the medical, aesthetic and health care industry in the Greater Bay Area.
The main views of Huaan Securities are as follows:
Leading medical aesthetic service provider in the Greater Bay Area, one-stop healthcare & medical aesthetic management, creating a full-cycle service system
Perfect Medical is one of the largest medical aesthetic service providers in Hong Kong. In fiscal year 2023, the company operated and managed 47 service points, including “medical+aesthetic” service centers, male medical centers, pain management centers, hair growth centers, post-natal repair centers, etc. There are 22 Hong Kong stores, 21 mainland stores and 1 Macau store in China. 1 overseas service point is located in Singapore, 2 are located in Australia, and the global business area is 294,000 square feet. The business area is vast. By exploiting the potential of medical aesthetics and related medical services to create a highly collaborative service ecosystem, the company has formed five major business segments: medical aesthetics, prophylaxis, pain medicine, preventive medicine, and reproductive medicine. FY2023 achieved operating income of HK$1,389 million, an increase of 2.91% over the previous year, and realized net profit of HK$316 million, an increase of 3.4% over the previous year. According to the revenue structure, FY2023 achieved medical and aesthetic business revenue of HK$1.12 billion (+30.9%), accounting for 77.4% of total sales contract revenue. According to geographical division, FY2023's Hong Kong/non-Hong Kong regions contributed HK$1,04/350 million in revenue respectively, +6.7%/-6.9% year-on-year, accounting for 74.9%/25.1%. The company recently disclosed the increase in sales contracts for Hong Kong's flagship medical tourism stores in June-August, with a growth rate of 52.6%. According to data released by the company in March 2023, the sales contract volume in mainland China increased by 85.9% and 64.5% year-on-year, respectively.
The full-cycle service model helps empower efficient profits, and diversified & international development drives business expansion
Profitability leads the industry, and performance recovers rapidly: The company's profitability is far ahead, and its net profit margin and return on investment are clearly superior to those of its peers at home and abroad. After the mainland epidemic control measures were relaxed at the end of 2022, the company recovered at full speed. The mainland sales contract volume in mainland China increased by 85.9% month-on-month and 64.5% year-on-year respectively in February 23, laying a good foundation for the company's future performance growth.
The one-stop service ecosystem covers the entire life cycle: the company uses medical aesthetics and related health care services as a market leader, increases customer retention through the five major businesses of medical aesthetics, probiotics, pain medicine, preventive medicine, and reproductive medicine, and leverages service synergy, low customer acquisition costs, and high customer stickiness.
Diversification & internationalization strategies help development: In terms of diversification, since 2021, the company has vigorously built a one-stop “health care+medical beauty” platform to facilitate customers to enjoy diversified services and cultivate new business growth points. In terms of internationalization, the company began entering the international market in 2020, expanding its business to Australia and Singapore, successfully cultivating overseas customers and increasing brand awareness.
There is broad room for market growth in the aesthetic medical industry, and customer needs need to be met urgently
Looking at the medical and aesthetic market, according to data from Frost & Sullivan, the market size of China's medical and aesthetic industry is expected to reach 653.5 billion yuan in 2030, and the potential is increasing rapidly. Looking at the hair growth medical industry, according to the 2021 National Health Commission survey data, 1 out of every 4 men or 8 women in China has hair loss, and there is a huge unmet demand for hair transplants. Looking at the subregion, the medical and aesthetic environment in Hong Kong is more mature, and private medical institutions are strictly controlled. The collaborative demand of mainland cities in the Greater Bay Area has helped Hong Kong medical brands such as Perfect Healthcare expand across regions.
Risk warning:Regulatory policy changes, medical and medical accidents, increased industry competition risks, and store performance risks.