Investment Rating - The report assigns a "Buy" rating to Gushengtang (2273 HK) with a target price of HKD 48 98 [4][14] Core Views - Gushengtang is a leading player in the TCM (Traditional Chinese Medicine) diagnosis and treatment service industry with a strong presence both online and offline [1][3] - The company benefits from favorable policies supporting the TCM industry and the increasing demand for TCM services due to China's aging population [2][12] - Gushengtang's revenue grew from RMB 900 million in 2019 to RMB 2 32 billion in 2023 with adjusted net profit increasing from RMB 77 million to RMB 305 million during the same period [1] - The company's OMO (Online-Merge-Offline) model effectively integrates online and offline services enhancing patient experience and expanding market reach [3][85] Industry Overview - The TCM health industry in China is expected to grow from RMB 12 82 trillion in 2022 to RMB 18 16 trillion in 2025 with a CAGR of 12% [2] - TCM diagnosis and treatment services account for the largest share of the TCM health industry with a market size of RMB 5 76 trillion in 2022 expected to reach RMB 9 89 trillion by 2025 [2][39] - The penetration rate of TCM diagnosis and treatment services is projected to increase from 13 3% in 2019 to 19 6% by 2030 driven by policy support and the aging population [43][46] Company Operations - Gushengtang operates 74 offline clinics as of July 2024 covering major regions in China including East China South China and North China [1] - The company has a robust network of over 37 000 TCM practitioners including 14 000 with senior titles [3] - Membership revenue accounted for 47% of offline revenue in H1 2024 up from 25% in 2020 indicating strong customer loyalty [3][74] - Online business revenue increased to 10% of total revenue in H1 2024 driven by the OMO model and the acquisition of online platforms like Bailu [3][86] Financial Projections - Revenue is expected to grow from RMB 3 042 million in 2024 to RMB 5 006 million in 2026 with a CAGR of 28% [4][95] - Adjusted net profit is projected to increase from RMB 409 million in 2024 to RMB 691 million in 2026 [4][95] - The gross margin for the core medical health solutions business is expected to improve from 30 8% in 2024 to 32 3% in 2026 [10][95] Valuation - The report uses both relative and absolute valuation methods to derive a target price of HKD 48 98 [4][14] - Relative valuation based on a PE multiple of 28x suggests a fair value of HKD 51 05 [97] - Absolute valuation using the FCFF method yields a fair value of HKD 46 90 [103] Growth Drivers - Expansion through self-built and acquired clinics is expected to drive market coverage and revenue growth [13][105] - Increasing demand for TCM services due to rising chronic disease prevalence and aging population [13][105] - Potential for further policy support for the TCM industry [13][105]
固生堂：投资价值分析报告：深耕中医诊疗服务行业，线上线下布局奠定龙头地位