【行业研究报告】医思健康-HK-Mainland border reopening to revive cross-border medical consumption

6Jan2023
CMBInternationalGlobalMarkets|EquityResearch|CompanyUpdate
ECHealthcare(2138HK)
HK-Mainlandborderreopeningtorevivecross-
bordermedicalconsumption
ECHealthcare(ECH)reportedFY1H23revenueofHK$1,893mn,upby31%
YoY,inwhichrevenuefromaestheticmedicalandbeautyandwellness
(collectively,consumermedical)segmentdeclinedby2%YoY,causedbystore
closuresinAprilandagradualrecoverythereafterinHKaswellasregulatory
headwindsandCOVIDdisruptionsinMainland.However,salesvolume
(generatedfromcontractedsales)showedcontinuousrecoverybyquarter,up
by21%/11%QoQinFY1Q23/FY2Q23,followinga19%QoQdeclineinFY4Q22
duetoCOVIDlockdownsinHK.AsHK-Mainlandborderreopeningwillbe
officiallyresumedon8Jan2023,weexpectECHwilldirectlybenefit.
TheHK-MainlandborderreopeningisexpectedtosupportFY24
businessgrowth,especiallyforconsumermedicalservices.Sincethe
businessgrowth,especiallyforconsumermedicalservices.Sincethe
Chinesegovernmentactivelyadjustedpandemiccontrolmeasuresinend-
2022,thequarantine-freetravelbetweenHKandMainlandhasbeenwidely
anticipatedbythemarket.On5Jan2023,theStateCouncilandHK
governmentannouncednewpoliciestoofficiallyallowborderreopeningfor
travellersstartingfrom8Jan2023(link1&link2).WebelieveECHwill
substantiallybenefitfromHK-Mainlandborderreopening,giventhat30-40%
ofECH’stotalrevenuewerecontributedfromcross-bordertravellersbefore
thepandemic,accordingtoECH’smanagement.AsHK-Mainlandtravelling
willberesumedonagradualbasis,revenuefromcross-bordertravellers
willalsobelargelygeneratedinFY24(endedMar2024).Previously,ECH’s
consumermedicalservicesweredisruptedbythestrictpandemiccontrol
measuresadoptedinHKandMainland,andwethinkborderreopeningwill
havemorepositiveimpactsonthispartofbusinessforECH.Weforecast
revenueofECH’sconsumermedicalservicestogrowby17%/40%/25%
YoYinFY23/FY24/FY25,respectively.
Enhancingservicecapabilitiesduringthepandemictobettercapture
consumptionrecoveryopportunitiesfromcross-bordertourists.
Despitetheharshmacroenvironmentafterpandemicoutbreak,ECHhas
beenpersistentlyimplementingitsM&Astrategytodiversifyitsservice
portfoliointhepastthreeyears.TotalM&Aexecutionvalueamountedto
HK$641/HK$219mninFY22/FY1H23.NotableM&AdealsincludeBayley&
Jackson,apremiumHK-baseddentalchain,multipleHK-basedveterinary
clinics,andasharesubscriptionofahospitalgrademedicalbuildinginTsim
ShaTsuiofHK.Comparedwithitspre-pandemicservicestructurecentering
onconsumermedicalcategories(accountingfor71%oftotalrevenuein
FY19),ECHhasnowofferedcustomerswithmoreoptionsinspecialized
medicalservices,suchasdental,medicalimagingandveterinaryservices.
TheenhancedservicescapabilitiesputECHinagoodpositiontomeet
diversifiedmedicaldemandforbothlocalandcross-bordercustomers.
MaintainBUY.WeraisedourTPtoHK$11.02,basedona10-yearDCF
model(WACC:11.8%,terminalgrowth:2.0%),toreflectcustomertraffic
resumptionfromHK-mainlandborderreopening.