20211201-招银国际-医思健康-02138.HK-Strong_recovery_continued_5页_1mb

EC Healthcare (2138 HK) Summary

Core Content Overview

EC Healthcare (ECH) is a Hong Kong-based healthcare company that has demonstrated strong recovery in its financial performance and business operations following the impact of the pandemic. The company has been focusing on expanding its medical services through acquisitions and leveraging the reopening of borders to boost its growth.

Key Financial Highlights

1HFY22 Performance

• Revenue: HK$1,444 million (+81% YoY)
• Attributable Net Profit: HK$160 million (+265% YoY)
• Medical Services Revenue: Up 110% YoY, contributing 53% of total revenue
• Mainland Customers: Accounted for 30–40% of total sales pre-pandemic
• Macau Revenue: Jumped by 202% YoY due to border reopening

Earnings Summary (YE 31 Mar)

DCF Valuation

• Target Price: HK$22.40
• Previous Target Price: HK$22.29
• Valuation Assumptions:
  • WACC: 11.0%
  • Terminal Growth Rate: 3.0%
• P/E Ratios:
  • FY22E: 70.5x
  • FY23E: 48.6x

Main Business Segments and Growth Drivers

• Medical Services: Strong rebound with 110% YoY growth in 1HFY22, contributing 50.6% of total revenue in FY22E.
• Aesthetic Medical Services: Revenue increased by 28.7% in FY22E, indicating growth in this segment.
• Beauty & Wellness Services: Revenue decreased slightly to 15.8% in FY22E, but remains a core business.
• Acquisitions:
  • Acquired two veterinary chains, aiming to capture 10–20% of the HK $3–4bn veterinary services market.
  • Acquired 70% of equity in a specialty medical services center for HK$100 million.
  • Acquired 55% of equity in a premium dental clinic brand for HK$129 million at 16x P/E.

Strategic Acquisitions

• Vet Chains: Expand into the pet service market and increase market share.
• Specialty Medical Services: Enhance capabilities across multiple medical disciplines.
• Dental Clinics: Strengthen leadership in the discretionary medical market through brand recognition and corporate clients.

Market Position and Analyst Rating

• Analyst Rating: BUY
• Target Price: HK$22.40, implying a potential upside of +80.68% from current price (HK$12.40).
• Outperform: The company is expected to outperform the market over the next 12 months.

Key Ratios and Performance Metrics

• Gross Margin: Steadily increased from 89% to 89.80% in FY22E.
• Operating Margin: Improved from 18.34% to 22.33% in FY22E.
• Net Margin: Increased from 12.33% to 15.78% in FY22E.
• ROE: Rose from 26.6% to 40.1% in FY22E.
• Current Ratio: Improved to 2x in FY24E, indicating stronger liquidity.

Key Risks and Disclaimers

• Pandemic Impact: Initially severely affected by the pandemic, but has shown strong recovery.
• Regulatory Environment: Regulatory tightening in the aesthetic medical sector in mainland China could benefit companies with high compliance standards like ECH.
• Market Risks: The company's performance is subject to market volatility and regulatory changes.
• Disclaimer: The report is not investment advice and is for informational purposes only. Investors should consult with a professional financial advisor.

Conclusion

EC Healthcare has shown a strong recovery in its financials and business operations post-pandemic. Strategic acquisitions have helped diversify and expand its offerings, contributing significantly to revenue growth. The company's performance is expected to continue improving, with a BUY rating and a target price that reflects its potential for growth. Investors should consider the risks and seek professional advice before making investment decisions.