20211228-招银国际-锦欣生殖-01951.HK-Core_emphasis_on_provision_of_high_quality_medical_services_4页_994kb

Jinxin Fertility (1951 HK) Company Update Summary

Core Emphasis on High-Quality Medical Services

Jinxin Fertility continues to focus on providing high-quality medical services, enhancing its capabilities through the appointment of industry-renowned professionals. Key appointments include:

• Mr. Duan Tao as Chief Strategy Officer, who has previously served as the president of Sichuan WCH and Shanghai First Maternity and Infant Hospital.
• Dr. Li Yuan as Chief Medical Officer, who has led the reproductive center of Beijing Chaoyang Hospital to become one of the top clinical centers in Beijing.

These appointments aim to improve the quality of services and strengthen the company's market position.

Operational Developments

• Wuhan Jinxin Hospital is expected to resume IVF operations in mid-2022E after passing government inspections.
• The IVF revenue at Wuhan Jinxin Hospital is projected to decline from RMB38mn in 2021E to RMB16mn in 2022E due to the temporary suspension.
• Despite this, the impact on overall financial performance is expected to be minimal.

Strategic Synergies

• The integration of ARS (Assisted Reproductive Services) with OB/GYN and Pediatrics services is a key strategic move.
• Sichuan WCH is the only private Class III Grade-A OB/GYN & Pediatrics hospital in China, providing a unique position in the market.
• The company plans to offer integrated services covering pregnancy preparation, ARS, childbirth, and postpartum care, which is expected to:
  • Enhance customer loyalty
  • Maximize customer lifetime value
  • Increase regional influence
  • Promote costless customer conversion (RMB56k for ARS vs up to RMB170k for full life cycle services)
• Economies of scale are anticipated to lead to:
  • Cost efficiencies
  • Increased bargaining power with supply chain partners
  • Lower user acquisition costs
• Strong brand awareness is expected to further support these benefits.

Financial Performance and Projections

Earnings Summary (YE 31 Dec)

Earnings Revision

Key Financial Ratios

Valuation and Investment Recommendation

• Target Price (TP): HK$19.01 (revised down from HK$25.44)
• Current Price: HK$8.86
• Up/Downside: +114.51%
• Recommendation: BUY
• Reasoning: The company is expected to replicate its successful business model in Chengdu to other regions, including Shenzhen, Wuhan, and Kunming. The revised earnings and TP reflect the temporary suspension of IVF operations at Wuhan Jinxin Hospital, with adjusted net profits revised down by 6% / 16% / 22% for FY21E/FY22E/FY23E respectively.

Shareholding and Market Performance

Shareholding Structure

Share Performance (3-months)

Financial Highlights

• DCF Valuation (RMB mn): Total PV is estimated at RMB38,271, with a terminal value of RMB29,557.
• WACC: 10.2%
• Terminal Growth Rate: 4.0%
• Equity Value: RMB39,555
• Price per Share (HK$): HK$19.01

Analyst Certification and Disclosures

• The research analyst certifies that the views expressed accurately reflect their personal views and confirms no direct or indirect compensation is related to the report.
• CMBIS does not provide individually tailored investment advice and the report is not an offer to buy or sell any security.
• The report contains no guarantees and is subject to change without notice.
• CMBIS may have financial interests in the issuer and may act as a market maker or engage in transactions in the securities of the companies mentioned.

CMBIS Ratings

• BUY: Stock with potential return of over 15% over next 12 months
• HOLD: Stock with potential return of +15% to -10% over next 12 months
• SELL: Stock with potential loss of over 10% over next 12 months
• OUTPERFORM: Industry expected to outperform the relevant broad market benchmark
• MARKET-PERFORM: Industry expected to perform in-line with the relevant broad market benchmark
• UNDERPERFORM: Industry expected to underperform the relevant broad market benchmark

Conclusion

Jinxin Fertility continues to expand its market presence through strategic acquisitions and enhanced medical service offerings. Despite the temporary suspension of IVF operations at Wuhan Jinxin Hospital, the company is expected to maintain its growth trajectory and benefit from integrated service models and economies of scale. The current BUY recommendation reflects the company's potential for strong returns and long-term growth, supported by its strong brand and operational synergies.