20221102-招银国际-云康集团-02325.HK-Continued_solid_revenue_growth_in_9M22_5页_1mb

Yunkang Group (2325 HK) Summary

Core Content

Yunkang Group (2325 HK) has demonstrated continued solid revenue growth in the first nine months of 2022 (9M22), with unaudited revenue reaching RMB2,328 million, representing a 90.9% YoY increase. This performance accounts for 85.6% of the previous full-year estimates, with 3Q22 revenue reaching RMB950 million.

The company's core business, diagnostic testing services for medical institution alliances, has maintained rapid growth, with unaudited revenue increasing 143.6% YoY to RMB1,043.4 million. This growth is attributed to the expansion of on-site diagnostic centers, which increased by 110 new centers, bringing the total to 385 centers. The average revenue per center rose to RMB2.7 million, compared to RMB2.2 million in FY21, indicating strong scalability and efficiency improvements.

Yunkang also reported robust growth in key products, particularly in tumor, infectious diseases, and blood disease testing, contributing significantly to the diagnostic outsourcing services segment, which saw 61.8% YoY growth to RMB1,214.3 million.

The co-development business model has proven effective in supporting the hierarchical diagnosis construction initiative highlighted in the 2022 Government Work Report. By collaborating with hospitals, Yunkang is able to expand its testing service network efficiently and at a lower cost, enhancing the testing capabilities of member hospitals and increasing patient demand.

Main Points

• Revenue Growth:

  • 9M22 revenue: RMB2,328 million (+90.9% YoY)
  • FY22E revenue: RMB3,025 million (+78.3% YoY)
  • FY23E revenue: RMB3,025 million (+0.0% YoY)
  • FY24E revenue: RMB3,091 million (+2.2% YoY)

• Net Profit Growth:

  • 9M22 net profit: RMB553.5 million (+44.9% YoY)
  • FY22E net profit: RMB553 million
  • FY23E net profit: RMB598.4 million (+8.1% YoY)
  • FY24E net profit: RMB696.5 million (+16.4% YoY)

• EPS Growth:

  • FY22E EPS: RMB0.89 cents
  • FY23E EPS: RMB0.96 cents (+8.1% YoY)
  • FY24E EPS: RMB1.12 cents (+16.4% YoY)

• Valuation and Target Price:

  • Maintain BUY rating
  • Target Price: HK$21.39 (down from HK$23.21)
  • Upside Potential: 48.6% from current price HK$14.40

• DCF Valuation:

  • Equity Value: RMB11,696 million
  • Terminal Value: RMB20,761 million
  • Terminal Growth Rate: 2.0%
  • WACC: 13.2%

Key Information

• Gross Margin: Improved from 45.10% in FY22E to 48.58% in FY24E, showing increasing efficiency in operations.

• Net Gearing: Stabilized at -35.6%, indicating a strong capital structure.

• Shareholding Structure:

  • YK Development: 40.3%
  • Daan International: 33.8%

• Stock Data:

  • Market Cap: HK$8,946 million
  • Average 3-month turnover: HK$15.7 million
  • Total Issued Shares: 621.3 million

• Financial Highlights:

  • Operating Profit: Increased from RMB667 million in FY22E to RMB839 million in FY24E
  • Net Cash from Operations: Rose to RMB807 million in FY24E
  • Capital Expenditure (Capex): Maintained at RMB300 million in FY22E and RMB350 million in FY24E

• Sensitivity Analysis:

  • Terminal Growth Rate significantly affects the valuation, with a 2.0% growth rate yielding a target price of HK$21.39
  • WACC also impacts valuation, with 13.2% being the base rate used in the analysis

Analyst Recommendations

• BUY Rating: Maintained, with the company expected to deliver 78.3% YoY revenue growth in FY22E and 45.3% YoY net profit growth in FY23E.
• Outperform: The company is expected to outperform the broader market in the next 12 months.

Disclaimer

• The information is based on analyses and public data, and is not guaranteed for accuracy or completeness.
• No individual investment advice is provided, and investors are encouraged to consult financial advisors.
• CMBIGM may have investment banking relationships with the companies discussed, and conflicts of interest may exist.
• The report is intended for specific investors, including major US institutional investors, and is not for general distribution.