Core Viewpoint - The company reported a decline in revenue and net profit for the first half of 2025, primarily due to the impact of healthcare payment reforms, but is actively optimizing its business structure and expanding into new markets, which may lead to gradual recovery in revenue over time [1][2]. Financial Performance - The company achieved revenue of 1.99 billion yuan, a decrease of 16.47%, and a net profit attributable to shareholders of 247 million yuan, down 35.76% [1] - Adjusted net profit was 263 million yuan, reflecting a decline of 34.5%, with an adjusted net profit margin of 13.2%, down 3.6 percentage points [1][2] - The hospital business generated revenue of 1.94 billion yuan, a decrease of 15.83%, with outpatient and inpatient revenues declining by 11.12% and 18.39% respectively [1] Operational Efficiency - Operating cash flow increased significantly to 456 million yuan, up 29.91%, with a substantial improvement in net cash ratio by 94.3 percentage points [3] - Trade receivables decreased by 10.7% compared to the beginning of the year, indicating effective working capital management [3] - The company is in the early stages of a refined management transformation, which is expected to gradually enhance cost control and profitability in the long term [2] Future Outlook - The company anticipates a gradual recovery in revenue as policy impacts diminish and the market expands due to an aging population [1] - Profit forecasts for 2025-2027 are 515 million, 628 million, and 718 million yuan, reflecting a year-on-year change of -13.9%, +21.9%, and +14.3% respectively [3] - The current stock price corresponds to a PE ratio of 15.5, 12.7, and 11.1 for 2025-2027, with a target price of 16.44 HKD based on an 18x PE for 2025 [3]

Investment Rating - The report maintains a "Recommended" rating for the company with a target price of HKD 16.44 [2][7]. Core Views - The company's performance is under short-term pressure but is expected to recover steadily in the long term [2]. - Revenue for the first half of 2025 was HKD 1.99 billion, a decrease of 16.47%, while net profit attributable to the parent company was HKD 247 million, down 35.76% [2]. - The adjusted net profit was HKD 263 million, reflecting a decline of 34.5%, with an adjusted net profit margin of 13.2%, down 3.6 percentage points [2]. Financial Performance Summary - **Revenue and Profit Forecasts**: - Total revenue is projected to grow from HKD 4.45 billion in 2024 to HKD 5.41 billion in 2027, with growth rates of 9.0%, 3.4%, 8.5%, and 8.3% respectively [4]. - Net profit attributable to the parent company is expected to decline from HKD 598 million in 2024 to HKD 515 million in 2025, before recovering to HKD 718 million by 2027 [4]. - **Earnings Per Share (EPS)**: - EPS is forecasted to decrease from HKD 0.96 in 2024 to HKD 0.83 in 2025, then increase to HKD 1.16 by 2027 [4]. - **Valuation Ratios**: - The price-to-earnings (P/E) ratio is projected to be 15.5 in 2025, 12.7 in 2026, and 11.1 in 2027 [4]. Operational Insights - **Revenue Structure Optimization**: - The company's hospital business generated revenue of HKD 1.94 billion in the first half of 2025, down 15.83%, with outpatient and inpatient revenues declining by 11.12% and 18.39% respectively [7]. - The company is actively optimizing its revenue structure and enhancing diagnostic and treatment technologies, with a 2.3 percentage point increase in the proportion of technical service revenue compared to the same period last year [7]. - **Cost Management and Profitability**: - The gross margin for the first half of 2025 was 26.57%, down 5.19 percentage points, primarily due to revenue pressure and rigid costs [7]. - The adjusted net profit margin was 13.2%, reflecting a decrease of 3.6 percentage points, as the company enters a new phase of refined management aimed at improving efficiency [7]. - **Cash Flow and Operational Efficiency**: - Operating cash flow increased significantly to HKD 456 million, up 29.91%, with a substantial improvement in net cash ratio [7]. - The company has shown effective management of working capital, with trade receivables decreasing by 10.7% compared to the beginning of the year [7].