【行业研究报告】中国平安-Strong post-COVID business rebound

25Nov2022
CMBInternationalGlobalMarkets|EquityResearch|CompanyUpdate
ECHealthcare(2138HK)
Strongpost-COVIDbusinessrebound
Experiencingstrongbusinessrebound.ECHealthcare(ECH)reported
FY1H23revenueofHK$1,893mn,upby31%YoY,andattributablenetprofitof
HK$80mn,downby50%YoY,accountingfor50%/19%ofourfull-year
estimates,respectively.Salesvolume(generatedfromcontractedsales)
showedcontinuousrecoverybyquarter,upby21%/11%QoQin
FY1Q23/FY2Q23,followinga19%QoQdeclineinFY4Q22duetoCOVIDlock
downinHK.Medicalservicesegmentdeliveredastrongrebound,withrevenue
upby48%YoYtoHK$1,175mninFY1H23,whilerevenuefromaesthetic
medicalandbeautyandwellnesssegmentunderwenta2%YoYdeclineto
HK$607mn,causedbystoreclosuresinAprilandagradualrecoverythereafter
inHKaswellasregulatoryheadwindsandCOVIDdisruptionsintheMainland.
Asidefromtheabove-mentionedoperationdifficultiesinHKandtheMainland,
theYoYdeclineinattributablenetprofitwasalsomainlytriggeredbyrisingcosts
duetoinflation,temporarilylowoperationleverageoftheCompany’snewly
establishedservicesites,andtheincreasingD&Aexpensesfromnewly
acquiredbusiness.
RelaxationofCOVIDcontrolmeasuresinHKsettoboostgrowthof
medicalservices,especiallyforconsumermedicalservicesinFY2H23.
medicalservices,especiallyforconsumermedicalservicesinFY2H23.
ThestronggrowthofmedicalservicesinFY1H23wasmostlydrivenbythe
organicgrowthwithsurgingdemandandrisinghealthcareawarenessdue
toCOVIDinHK.Fortheaestheticmedicalandbeautyandwellness
segment,itexperiencedstoreclosuresfor20daysinHK,anaverageof26
daysinShenzhenand122daysinShanghai,duetoCOVIDcontrol
measuresineachcityinFY1H23.WiththerelaxationofCOVIDcontrol
measuresinHKwhereECHgenerated92%oftotalrevenueinFY1H23,we
expecttheCompanywillcontinueitsrevenuegrowthtrendinmedical
servicesandislikelytoseeeffectiverecoveryonitsconsumermedical
servicesinFY2H23,whichweexpectwillsignificantlyimprovenetprofit
marginaswell.
ContinuingM&Astrategyamiduncertainmacroenvironment.In
FY1H23,thevalueofexecutedM&AdealsbyECHreachedHK$219mn.
TheCompanyenteredintoasharesubscriptionof30%issuedsharesofa
hospitalgrademedicalbuildinginTsimShaTsuiofHKwithinitialcapital
contributionofHK$254mn.ECHplanstotransferthebuildingtobecomea
one-stopcentreforpremiummedicalandmedicalaestheticservicesinthe
coreareaofHK.Additionally,ECHacquired60%ofequityinterestof
PioneerEvolutionataconsiderationofHK$36.4mn,furtherenhancingits
capabilitiesinmulti-disciplinaryhealthcareserviceswith9clinicsand23full-
timeregisteredmedicalpractitioners.Facingwithuncertainmacro
environmentinHKandtheMainland,ECHcanleverageitsabundant
financialresourcesandstrongbusinessintegrationcapabilitiestoenhance
itsleadingpositioninthehealthcaremarketintheGreaterBayarea.
MaintainBUY.WerevisedourTPtoHK$10.34,basedona10-yearDCF
model(WACC:11.8%,terminalgrowth:2.0%),toreflecthighercostin
businessexpansionanduncertainrecoveryofconsumermedicalservices.