Investment Rating - The report assigns a "Buy" rating to Yunkang Group (2325 HK) with a target price of HKD 10 5, implying a potential upside of 26% from the current price of HKD 8 4 [3] Core Views - Yunkang Group's 1H24 performance was weak, with a net loss of RMB 130 million, primarily due to declining revenues across its three core business segments and increased industry competition [1] - The company's revenue fell by 20% YoY to RMB 380 million in 1H24, driven by slower-than-expected growth in routine testing demand and price declines in the ICL industry [1] - Gross margin decreased by 4 4 percentage points to 33 7% due to high fixed costs and reduced economies of scale [1] - Accounts receivable impairment continued to impact profitability, with RMB 100 million in impairment losses recorded in 1H24 [1] - The ICL industry is expected to face intensified price competition in the short term, as post-pandemic testing demand has declined, leading to excess capacity [1] - Accounts receivable aging is increasing, with 50% of receivables aged 1-2 years, and impairment is expected to continue affecting profitability [1] Financial Performance and Forecasts - Revenue for 2024E is projected at RMB 720 million, with a YoY decline of 19 2%, followed by a gradual recovery to RMB 807 million by 2026E [2] - Gross margin is expected to stabilize at around 32 0% in 2024E, improving to 36 0% by 2026E [5] - The company is forecasted to remain in a loss-making position in 2024E and 2025E, with a slight profit of RMB 5 2 million expected in 2026E [5] - The DCF valuation model, with a WACC of 10 0% and a perpetual growth rate of 2 0%, supports the target price of HKD 10 5 [1] Industry Context - Major ICL companies, including KingMed, Dian Diagnostics, and Adicon, also reported significant revenue and profit declines in 1H24, reflecting broader industry challenges [1] - The National Healthcare Security Administration's policy to accelerate medical insurance fund payments could potentially improve accounts receivable collection in the future [1] Market Expectations - The market consensus for Yunkang Group's target price ranges from HKD 7 0 to HKD 13 0, with SPDBI's base case target at HKD 10 5 [8] - The optimistic scenario assumes a steady gross margin above 50% and a core non-COVID revenue CAGR of over 20% from 2023-26E, while the pessimistic scenario projects a gross margin below 30% and a CAGR below 5% [8]
云康集团：1H24业绩表现乏力，预计行业竞争及应收款减值中短期仍将影响公司盈利