The Zhitong Finance App learned that CICC released a research report stating that it maintained China Resources Healthcare's (01515) “outperforming the industry” rating and maintained 2024/2025 net profit of RMB551/715 billion, an increase of 113.8%/29.8% over the previous year, with a target price of HK$5.6. The company announced its 2023 results: revenue of RMB 10.108 billion, up 27.9% year on year; net profit to mother of RMB 258 million, a decrease of 3.1% year on year, in line with the forecast.

The main views of CICC are as follows:

The hospital network layout has been further expanded, and the hospital business revenue continues to grow.

By the end of 2023, the company managed and operated a total of 134 medical institutions (13 level-3 and 25 level-2) in 10 provinces and cities in China, with a total number of operating beds of 21,515. In 2023, the company's hospital business revenue was 9.406 billion yuan, up 33.4% year on year; of these, outpatient service revenue was 3,933 billion yuan, up 32.5% year on year; inpatient service revenue was 5.473 billion yuan, up 34.0% year on year, mainly due to the increase in the number of patients diagnosed and treated and the increase in bed usage.

Revenue from the stock of owned hospitals has been growing steadily.

In 2023, the operating income of the stock owned hospitals was 6.012 billion yuan, up 7.0% year on year; net profit to mother was 349 million yuan, up 23.1% year on year; gross profit margin of the hospital business was 18.2%, up 2.7 percentage points year on year. After excluding the impact of Huaiyin Hospital's one-time impairment, the hospital business segment's profit margin was 9.1%, up 2.3 percentage points year on year. In 2023, the number of routine outpatients in existing hospitals increased by 6.3% year on year, the number of hospitalizations increased by 9.2% year on year, the number of grade 3 and 4 surgeries increased by 1.2% year on year, and the number of operations increased by 1.4% year on year. The bank believes that the revenue growth of its own hospitals has been steady, and management efficiency has been further improved.

The profitability of Liaojian and Jiangneng hospitals continues to increase.

In 2023, the operating revenue of Liaojian and Jiangneng Hospitals was 4,096 million yuan, and net profit was 295 million yuan; the gross profit margin of the hospital business was 18.7%, up 2.8 percentage points year on year, and the hospital business segment's profit margin was 11.7%, up 2.5 percentage points year on year. In 2023, the number of routine outpatients at Liaojian and Jiangneng hospitals increased 15.0% year on year, the number of hospitalizations increased 10.8% year on year, the number of grade 3 and 4 surgeries increased 13.2% year on year, and the number of operations increased 17.4% year on year. The bank believes that the business diagnosis and treatment volume of Liaojian and Jiangneng hospitals is increasing rapidly.

Risk: Own hospital operations fall short of expectations, impairment of goodwill or asset disposal.