20221125-招银国际-中国平安-02318.HK-Strong_post-COVID_business_rebound_5页_1mb

EC Healthcare (2138 HK) Summary

Core Content

EC Healthcare (2138 HK) has demonstrated a strong post-COVID business rebound, with FY1H23 revenue reaching HK$1,893 million, a 31% increase compared to the previous year. However, the attributable net profit declined by 50% YoY to HK$80 million, reflecting the challenges faced in maintaining profitability amid rising costs, inflation, and operational constraints.

The medical services segment was a major driver of growth, achieving a 48% YoY increase to HK$1,175 million. In contrast, the aesthetic medical and beauty and wellness segment saw a 2% YoY decline to HK$607 million, primarily due to store closures in April and regulatory issues in the Mainland.

The relaxation of Hong Kong's COVID control measures is expected to boost the growth of medical services, especially consumer medical services, in FY2H23. This is anticipated to lead to a recovery in net profit margins.

Main Points

• Revenue Growth:

  • FY1H23 revenue: HK$1,893 million (+31% YoY)
  • Medical services revenue: HK$1,175 million (+48% YoY)
  • Aesthetic medical and beauty & wellness revenue: HK$607 million (-2% YoY)

• Profitability:

  • FY1H23 net profit: HK$80 million (-50% YoY)
  • Net profit margin: 6.72% (FY23E)
  • Expected improvement in net profit margin due to recovery in consumer medical services in FY2H23

• Market Position and Strategy:

  • ECH generates 92% of its revenue from Hong Kong
  • Company has a strong presence in the Greater Bay area
  • ECH continues its M&A strategy, executing deals worth HK$219 million in FY1H23
  • Acquired 60% of Pioneer Evolution for HK$36.4 million to enhance multi-disciplinary healthcare services

Key Information

• Target Price: HK$10.34 (revised from HK$13.90)
• Current Price: HK$5.21
• 12-Month Price Performance:
  • Absolute: -29.6%
  • Relative: -19.2%
• Market Capitalization: HK$6,154.2 million
• Shareholding Structure:
  • Tang Chi Fai: 61.3%
  • Goldman Sachs: 5.5%
• Financial Highlights (2020A–2025E):
  • Revenue is expected to grow from HK$1,949 million (2020A) to HK$6,048 million (2025E)
  • Net profit is projected to increase from HK$287 million (2020A) to HK$798 million (2025E)
  • EPS (Reported) is expected to rise from HK$0.19 (2020A) to HK$0.68 (2025E)
  • P/E ratio: 26.8 (2022A), expected to decline to 7.7 (2025E)
  • Dividend yield: 3.3% (2022A), projected to increase to 9.7% (2025E)

Financial Summary

Valuation and Growth Projections

• DCF Valuation (10-year model):

  • WACC: 11.8%
  • Terminal growth: 2.0%
  • Equity value: HK$12,219 million
  • Price per share: HK$10.34

• Growth Projections (2023E–2025E):

  • Revenue growth: 31.7%, 26.8%, 24.1%
  • Net profit growth: 30.9%, 107.5%, 48.8%
  • Operating margin: 10.98% (2023E) to 19.29% (2025E)

• Key Financial Metrics (2023E–2025E):

  • Gross margin: 86.94% to 89.00%
  • Operating margin: 10.98% to 19.29%
  • Net margin: 6.72% to 13.20%

Analyst Recommendation

• Maintain BUY:
  • Revised target price: HK$10.34
  • Based on 10-year DCF model
  • Reflects higher cost in business expansion and uncertainty in consumer medical service recovery

Analysts

• Jill WU, CFA: (852)3900 0842, jillwu@cmbi.com.hk
• Benchen HUANG, CFA: huangbenchen@cmbi.com.hk

Risk and Disclaimer

• The report contains forward-looking statements and is based on assumptions and analyses.
• There may be significant differences between actual results and projections.
• CMBIGM does not provide individually tailored investment advice.
• The report is for informational purposes only and should not be construed as an offer or solicitation to buy or sell securities.
• There are risks involved in trading securities, and investors should seek independent advice.