Jinxin Fertility (Jinxin) reported 2023 revenue of RMB2,789mn, up 18.0% YoY. Non-IFRS adjusted net profit grew substantially by 72.0% YoY to RMB472mn. Revenue was in line with our forecast while non-IFRS adjusted net income slightly missed our forecast by 5.7%, which was mainly attributed by one-off expenses of RMB31mn related to several lawsuits in the US. IVF business of Jinxin has resumed solid growth in 2023. The number of IVF treatment cycles performed by Jinxin increased by 15.8% YoY to 30,240 in 2023 (vs 4.5% YoY decline in 2022). The overall success rate in Chengdu and Shenzhen improved by 0.9ppt to 57.5%, demonstrating its superior medical service quality. For the year of 2024, management expects organic growth of at least 15% YoY in non- IFRS adjusted net profit.
　　Regaining healthy business growth post-pandemic. The number of IVF treatment cycles performed increased by 15.8% YoY to 30,240 in 2023 (vs a decline of 4.5% in 2022), setting a new company record. Jinxin experienced recoveries across all operation regions. Chengdu and the Greater Bay Area operations, as the pillars of Jinxin business, saw IVF cycle/ revenue growing 6.0%/ 11.9% YoY in 2023, respectively. Notably, Chengdu Xinan Hospital has been qualified to perform 3rd-gen IVF since Jul 2023. Management anticipated the new service to generate additional revenue of RMB80-100mn per annum after a one-year trial operation, representing 9.0%-11.2% of IVF revenue from Chengdu operation in 2023. IVF cycle/ revenue of Wuhan and Yunnan impressively increased by 42.7%/ 35.8% YoY in 2023, thanks to the resumption of IVF services at Wuhan Hospital and the ongoing business optimization of Jiuzhou Hospital and Hewanjia Hospital to focus on IVF. Overseas IVF cycle/ revenue increased by 11.7%/ 23.4% YoY in 2023, driven by the rebound of international patients to HRC in the US and a positive start of clinic operations in Laos.
　　Expecting more policy support to address challenges of population growth. According to National Bureau of Statistics of China, the number of the newborns was 9.02mn in 2023, a 5.6% drop from 2022, marking the seventh straight year of decline. To boost birth rates, several regions have introduced supportive measures since 2023. Beijing, Guangxi, Gansu, Inner Mongolia, Xinjiang, and Shandong have included certain assisted reproductive services (ARS) to their medical reimbursement lists. Such insurance coverage has significantly eased the financial burden on patients. For instance, Guangxi reimbursed over 44,000 cases at a reimbursement rate of 59.16% within four months after the policy taking effect. Additionally, the 2024 Government Work Report of China continued to highlight the need to boost birth rate. Management expects more regions to adopt supportive ARS policies in 2024.
　　Maintain BUY. We cut our DCF-based TP from HK$7.35 to HK$4.43 (WACC: 10.1%, terminal growth: 2.0%). We forecast Jinxin’s revenue to grow 14.0%/ 14.1%/ 15.5% YoY and non-IFRS adjusted net profit to grow 15.3%/ 12.9%/ 19.9% YoY in 2024E/ 25E/ 26E, respectively.