Jinxin Fertility Group reported 2023 revenue of Rmb2.79bn (+18% YoY), and net profit of Rmb345m (+185% YoY). Excluding one-off items, its adjusted net profit reached Rmb471m (+72% YoY), in line with our expectation. The total number of IVF treatment cycles increased 16% YoY to 30,368 in 2023. Its blended gross margin increased 5.2ppts YoY to 42.2% in 2023. Its selling and distribution expense ratio increased 0.5ppts YoY to 6.9% in 2023. In addition, the company announced the dividend of HK$5.95 cents per share in 2023 (vs nil for 2022). We maintain our adjusted EPS forecast of Rmb0.20 (+13% YoY) in 24E, Rmb0.24 (+19% YoY) in 25E and forecast Rmb0.27 (+14% YoY) in 26E. We lower our target price from HK$7.26 to HK$4.19. With 72% upside, we maintain BUY rating.
New growth drivers of business in Chengdu and Shenzhen. Revenue of Chengdu reached Rmb1.47bn (+6% YoY), with Chengdu’s ARS revenue growing 16% YoY due to the rising IVF cycles and demand for premium services while the revenue from obstetrics, gynecology and pediatrics business slightly declined 1% YoY to Rmb577m in 2023. With the approval of qualification of PGT for Jinxin’s Chengdu hospital and other newly launched businesses, such as ophthalmology and stomatology, we expect the solid growth of its Chengdu business. In addition, revenue of Shenzhen and HK reached Rmb407m (+17% YoY) and Rmb67m (+12% YoY) in 2023, together representing 17% of Jinxin’s total revenue. The relocation of new property in Shenzhen is expected in 1H25E, which will further increase its business coverage, expand the VIP service, and provide services for patients from the Greater Bay Area.
Ramp-up of Yunnan and Wuhan hospitals. In 2023, revenue of Wuhan increased 125% YoY to Rmb38m, with significant decline of losses since the resumption of its IVF license. In addition, revenue from the Yunnan hospitals grew 155% YoY to Rmb236m, with the number of IVF treatment cycles rising 28% YoY. With the enhanced business structure of hospitals in Yunnan and Wuhan, we expect the company to gain more market shares.
Continuous recovery of overseas business. As for US business, with the recovery of the number of international patients in 2023 to c.50% of that prior to the pandemic, the revenue of the HRC grew 23% YoY to Rmb568m, representing c.20% of its total revenue in 2023. With the recovery of international flights, we expect the continuous recovery of its US business. In 2023, the company recruited six new doctors for HRC and the company expects to further expanded its business network by establishing new clinics and recruiting more physicians in 2024E. In addition, revenue of Laos reached Rmb3m, with the trial operation since August 2023. Given the growth potentials of ARS market, the company expects to explore M&As opportunities in Southeast Asia.
Maintain BUY. We maintain our adjusted EPS forecast of Rmb0.20 (+13% YoY) in 24E, Rmb0.24 (+19% YoY) in 25E and forecast Rmb0.27 (+14% YoY) in 26E. We lower our target price from HK$7.26 to HK$4.19. With 72% upside, we maintain BUY rating.
Risks: lower-than-expected business recovery after the pandemic; larger-than-expected price cut of IVF treatment cycle.