20220815-招银国际-云康集团-02325.HK-Strong_growth_driven_by_continued_expansion_of_medical_institution_alliance_network_5页_881kb

Yunkang Group (2325 HK) Summary

Core Content and Key Information

Yunkang Group (2325 HK) reported strong revenue growth in the first half of 2022 (1H22), driven primarily by the expansion of its diagnostic testing services for medical institution alliances, especially under the impact of the dynamic zero-Covid policy in China. The company's revenue increased by 82% YoY to RMB1.38bn, while the net profit rose by 50% YoY to RMB234.4mn. Despite this growth, the gross margin decreased to 47.2% from 50.9% in 1H21 and 53.0% in FY21, due to the regulation of government prices on Covid-19 tests. The net profit margin also declined to 17.0% from 20.6% in 1H21, reflecting the impact of lower margins on core services.

The company has declared an interim dividend of HK$0.088 per share, with a 20% payout ratio, indicating its confidence in financial stability and profitability. Trade and other receivables increased to RMB1.57bn as of June 2022, due to increased service orders and longer settlement periods from public hospitals and the China CDC.

Main Business Growth

• Diagnostic Testing Services for Medical Institution Alliances:
  • Revenue from on-site diagnostic services increased by 166% YoY to RMB650.7mn, significantly outperforming the 41% YoY growth in diagnostic outsourcing services (ICL business).
  • These services now account for 47% of total revenue, up from 32% in 1H21.
  • As of June 2022, Yunkang has 350 on-site diagnostic centres and nearly 90 additional centres under development.
  • The semi-annual average revenue per centre was RMB1.9mn, slightly below the full-year average of RMB2.2mn in FY21.

Strategic Expansion and Operational Enhancements

• Yunkang plans to expand its medical institution alliance network, focusing on pathology, genetic, and infectious disease laboratories.
• The company is developing small-scale self-operated ICLs to provide timely services to its clients.
• It aims to digitise its testing services by building technical and operating systems to support its operations.
• Yunkang is also open to acquiring or investing in companies that offer business synergies.

Financial Performance and Valuation

• Revenue Growth:

  • FY20A: RMB1,200.3mn (77.1% YoY growth)
  • FY21A: RMB1,696.7mn (41.4% YoY growth)
  • FY22E: RMB2,719.2mn (60.3% YoY growth)
  • FY23E: RMB2,686.7mn (-1.2% YoY growth)
  • FY24E: RMB2,750.3mn (2.4% YoY growth)

• Net Profit Growth:

  • FY20A: RMB381.9mn (46.8% YoY growth)
  • FY21A: RMB601.9mn (57.6% YoY growth)
  • FY22E: RMB605.8mn (0.6% YoY growth)
  • FY23E: RMB658.8mn (8.8% YoY growth)

• Earnings Per Share (EPS):

  • FY22E: RMB0.97
  • FY23E: RMB0.98
  • FY24E: RMB1.06

• P/E Ratio:

  • FY22E: 16.6x
  • FY23E: 16.5x
  • FY24E: 15.2x

• Net Gearing:

  • FY20A: (32.4%)
  • FY21A: (36.2%)
  • FY22E: (36.8%)
  • FY23E: (37.8%)

Analyst Ratings and Valuation

• Maintain BUY with a revised DCF-based target price of HK$23.21, down from HK$23.44.
• Up/Downside: 23.9% relative to the current price of HK$18.74.
• Terminal Growth Rate: 2.0%
• WACC: 11.9%
• DCF Valuation (2022E): RMB11,324mn
• Equity Value (2022E): RMB12,256mn
• Price per Share (2022E): HK$23.21

Shareholding and Stock Data

• Shareholding Structure:

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

• Stock Data:

  • Market Cap: HK$11,642.2mn
  • Total Issued Shares: 621.3mn

Financial Highlights

• Gross Margin:

  • FY22E: 49.82%
  • FY23E: 49.00%
  • FY24E: 50.30%

• Net Profit Margin:

  • FY22E: 22.1%
  • FY23E: 22.5%
  • FY24E: 24.0%

• ROA:

  • FY22E: 17.3%
  • FY23E: 16.0%
  • FY24E: 15.9%

• ROE:

  • FY22E: 23.4%
  • FY23E: 21.1%
  • FY24E: 20.4%

Risk Adjusted DCF Valuation

• FCFF:

  • FY22E: RMB61mn
  • FY23E: RMB448mn
  • FY24E: RMB482mn
  • FY25E: RMB546mn
  • FY26E: RMB619mn
  • FY27E: RMB915mn
  • FY28E: RMB1,257mn
  • FY29E: RMB1,613mn
  • FY30E: RMB1,984mn

• Terminal Value (2030E): RMB20,469mn

Sensitivity Analysis

• Terminal Growth Rate:

  • 3.0%: HK$28.87
  • 2.5%: HK$27.63
  • 2.0%: HK$26.53
  • 1.5%: HK$25.54
  • 1.0%: HK$24.66

• WACC:

  • 10.9%: HK$28.87
  • 11.4%: HK$27.63
  • 11.9%: HK$26.53
  • 12.4%: HK$25.54
  • 12.9%: HK$24.66

CMBIGM Estimates vs Consensus

• Revenue:

  • CMBIGM: FY22E: RMB2,719mn (13.3% higher than consensus)
  • FY23E: RMB2,687mn (-2.7% lower than consensus)
  • FY24E: RMB2,750mn (-6.5% lower than consensus)

• Gross Profit:

  • CMBIGM: FY22E: RMB1,355mn (12.2% higher than consensus)
  • FY23E: RMB1,317mn (-4.6% lower than consensus)
  • FY24E: RMB1,383mn (-8.0% lower than consensus)

• Operating Profit:

  • CMBIGM: FY22E: RMB725mn (-25.8% lower than consensus)
  • FY23E: RMB730mn (-35.8% lower than consensus)
  • FY24E: RMB794mn (-11.6% lower than consensus)

• Net Profit:

  • CMBIGM: FY22E: RMB602mn (11.1% higher than consensus)
  • FY23E: RMB606mn (-4.0% lower than consensus)
  • FY24E: RMB659mn (-9.9% lower than consensus)

• EPS (RMB):

  • CMBIGM: FY22E: RMB0.97 (10.5% higher than consensus)
  • FY23E: RMB0.98 (-4.4% lower than consensus)
  • FY24E: RMB1.06 (-9.7% lower than consensus)

CMBIG 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

Analyst Certification

• The analyst certifies that all views accurately reflect their personal views.
• No compensation was directly or indirectly related to the specific views expressed.
• The analyst and their associates have not traded in the stock covered in the report within 30 days prior to its issue.

Important Disclosures

• The report is not investment advice and should not be construed as an offer to buy or sell any securities.
• CMBIGM does not provide individually tailored investment advice.
• There are risks involved in trading securities, and actual events may differ materially from the report.
• The information is subject to change without notice, and CMBIGM may issue other reports with different conclusions.

Distribution Restrictions

• This report is intended solely for major US institutional investors and may not be distributed to others.
• In the UK, it is only provided to persons under Article 19(5) or Article 49(2) of the Financial Promotion Order.
• In Singapore, it is distributed by CMBI (Singapore) Pte. Limited, an Exempt Financial Adviser, and may only be provided to Accredited Investors, Expert Investors, or Institutional Investors.

Disclaimer

• The report is based on publicly available information and is not guaranteed for accuracy.
• CMBIGM may have investment banking relationships with the companies covered in the report, which may result in conflicts of interest.
• Recipients are advised to consult professional financial advisors before making investment decisions.