Investment Rating - The report assigns a "Buy-A" investment rating with a 6-month target price of 3 yuan [4][7]. Core Views - The medical service business has completed its bottoming process, and an inflection point is anticipated in the near future [2]. - The company experienced a significant revenue decline of 29.26% year-on-year in Q3 2025, primarily due to the impact of centralized procurement on core pharmaceutical products [3]. - Key operational metrics such as outpatient volume and average outpatient fees have stabilized year-on-year, while inpatient volume has decreased by 9% and average inpatient fees have dropped by 12% [2]. Financial Performance Summary - In Q3 2025, the company reported revenue of 668 million yuan and a net loss of 46 million yuan, with a year-on-year loss increase of 604.29% [3]. - Revenue growth rates for 2025 to 2027 are projected at -12%, 11.3%, and 10.1%, respectively, while net profit growth rates are expected to be -25.7%, 41.8%, and 23.6% [4][11]. - The company’s total market capitalization is approximately 7.72 billion yuan, with a circulating market capitalization of about 7.46 billion yuan [7].

Core Insights - The company announced a significant reduction in sales and management expenses in response to price declines following the centralized procurement of its product, Du Yi Wei [2] Group 1: Sales Expenses - Sales expenses primarily related to the pharmaceutical sector have decreased by 35% year-on-year in the first three quarters [2] Group 2: Management Expenses - Management expenses have also seen a reduction, with a year-on-year decrease of 23% in the first three quarters, achieved through various cost-cutting measures [2]

Summary of Conference Call Notes Company and Industry Overview - The company operates in the healthcare and pharmaceutical sectors, facing challenges due to policy changes and market dynamics, particularly related to the "Duyiwai" product and its impact on revenue and profitability [2][3][9]. Key Points and Arguments Financial Performance - The pharmaceutical segment's revenue for the first three quarters declined by over 50% year-on-year, primarily due to the impact of the "Duyiwai" centralized procurement, leading to significant drops in both sales volume and price [2][3]. - The medical services segment reported revenue of 2.018 billion yuan, a year-on-year decrease of 13.88%, with a profit margin of 6.5%, down by 1.5 percentage points [3]. - The company managed to stabilize outpatient visits at approximately 800,000 per quarter, with outpatient average costs around 270 yuan [4]. Cost Management - The company implemented cost control measures, resulting in a 35% reduction in sales expenses and a 23% decrease in management expenses year-on-year [2][8]. - The expected sales expense ratio for the next year is anticipated to remain similar to the current year, while management expenses are projected to decrease further [8]. Hospital Operations and Capacity Expansion - The bed occupancy rate is close to 80%, with plans to add 2,000 new beds across various hospitals, including Siyang Hospital and Chongzhou Second Hospital [2][6]. - The company is actively adjusting its patient admission strategies in response to changes in medical insurance payment policies [5][6]. Market Outlook - Following the implementation of centralized procurement for "Duyiwai," the average sales price dropped by 55%, and sales volume decreased by 36% in the first three quarters [14]. - A rebound in sales is expected in the fourth quarter, with projections indicating that total revenue could reach 60% of the total from the first three quarters [14][19]. Strategic Initiatives - The company is focusing on enhancing the performance of the "Duyiwai" brand through product specification changes, expanding sales capabilities, and entering new markets [17][18]. - There are ongoing efforts to inject strategic investments into the "Duyiwai" brand to strengthen its market position [18]. Regulatory and Policy Challenges - The company is adapting to healthcare policy changes by restructuring its service offerings and optimizing cost structures to maintain profitability [20][21]. - The introduction of DRG (Diagnosis-Related Group) payment models is being managed to stabilize revenue streams, with no significant new instances of payment refusals reported [10][11]. Shareholder Dynamics - Significant changes occurred among the top ten shareholders, with some shares being sold off due to judicial auctions, while stable institutional investors have increased their holdings, indicating confidence in the company's future [16]. Additional Important Insights - The company is actively pursuing health technology asset injections to enhance its growth potential, despite regulatory challenges [22]. - The overall market sentiment remains cautious, with expectations of a recovery in the fourth quarter as operational adjustments take effect [19].

Core Viewpoint - New Mile Health Technology Group reported a revenue of 1.588 billion yuan in the first half of 2025, reflecting a year-on-year decline of 20.63%, while implementing effective cost control measures to navigate industry challenges [2][4]. Financial Performance - The company achieved a revenue of 1.588 billion yuan in H1 2025, with the medical services segment contributing 1.38 billion yuan and the pharmaceutical segment 210 million yuan [2]. - Gross margin stood at 28.2%, with the medical services segment at 26% and the pharmaceutical segment at 40.47% [2]. - Pre-tax operating profit was 33.73 million yuan, and net profit attributable to shareholders was 7.43 million yuan [2]. - Operating cash flow was 140 million yuan, down 15% year-on-year, but the decline was less than that of revenue and profit [2]. Cost Control Measures - The drug cost ratio in the medical services segment was 24.10%, down 2.29 percentage points year-on-year, while the cost of consumables was 12.81%, down 0.91 percentage points [3]. - Overall variable cost ratios have been decreasing, indicating effective cost management [3]. Drug Procurement and Reimbursement - The company has actively managed drug cost ratios in response to medical insurance policies, achieving a 3.3 percentage point decrease in the first half of 2025 [4]. - As of H1 2025, the proportion of drug procurement through centralized purchasing was approximately 23% of total drug costs [4]. - Medical insurance revenue accounted for about 50.5% of total revenue, with stable reimbursement timelines [4]. Hospital Development and Service Expansion - The company is enhancing its hospital discipline layout and has made significant progress in hospital grading, with several hospitals achieving higher levels of accreditation [5]. - New bed expansions are underway, with multiple hospitals adding significant capacity [5]. Market Outlook and Strategic Initiatives - Following the implementation of centralized procurement policies, sales volumes are expected to recover and exceed last year's figures in the second half of 2025 [7]. - The company plans to adapt to ongoing medical insurance reforms and leverage opportunities in the aging economy, focusing on a dual-driven strategy of "medical + pharmaceutical" and "medical + insurance" [7].

Financial Performance - In the first half of 2025, the company achieved a revenue of 1.588 billion CNY, a year-on-year decrease of 20.63% [2] - The medical services segment generated 1.38 billion CNY, while the pharmaceutical segment contributed 210 million CNY [2] - Gross margin was 28.2%, with the medical services segment at 26% and the pharmaceutical segment at 40.47% [2] - Pre-tax operating profit was 33.73 million CNY, and net profit attributable to shareholders was 7.43 million CNY [2] - Operating cash flow was 140 million CNY, a decline of 15% [2] Cost Management - The drug cost ratio was 24.10%, down 2.29 percentage points year-on-year [4] - The cost of consumables accounted for 12.81%, a decrease of 0.91 percentage points [4] - Labor costs represented 36.24%, an increase of 0.71 percentage points, but variable labor costs decreased [4] - Overall, variable cost ratios are declining, indicating effective cost control [4] Hospital Operations - In the first half of 2025, outpatient visits and average outpatient costs remained stable, while inpatient visits decreased by approximately 9% and average inpatient costs fell by about 12% [2] - The company aims to control the drug cost ratio to around 35% in the second half of 2025 [5] - As of mid-2025, the proportion of procurement from centralized purchasing in drug costs was about 23% [6] Insurance and Revenue - Insurance revenue accounted for approximately 50.5% of total revenue in the first half of 2025 [7] - The payment cycle for insurance is typically 1-2 months for monthly payments and annual settlements for yearly payments [8] Strategic Developments - The company is focusing on enhancing hospital standards and technical capabilities, with 42 key disciplines and specialties established [16] - The company is actively adapting to policy changes in medical insurance and drug procurement, aiming to improve management and operational efficiency [15][17] - Plans for bed expansion include 800 new beds at Siyang Hospital and additional projects at other facilities [13][12] Future Outlook - The company anticipates a slowdown in revenue growth due to ongoing reforms in medical insurance payment methods, but expects to enhance management and service capabilities [15] - The focus will remain on integrating medical and pharmaceutical services, as well as expanding non-insurance revenue projects [17]

Core Viewpoint - The nationwide governance of traditional Chinese medicine (TCM) pricing is intensifying, marking a shift from a "policy safe haven" to a "transparent competitive pool," indicating the TCM industry is entering a "cost + efficacy" dual pricing era [1][11][12] Group 1: Price Governance Actions - Multiple regions, including Inner Mongolia, Hebei, Ningxia, Jilin, and Guangxi, have initiated special governance on TCM prices, requiring companies to adjust prices of products deemed excessively high [1][3] - The Guangxi Drug Group Procurement Service Platform announced a governance notice targeting 169 high-priced TCMs, mandating price adjustments based on the "minimum daily cost" within the province [3][4] - A total of 123 TCMs were identified with price discrepancies, with some exceeding the minimum daily treatment cost by over 915 times [3][4] Group 2: Industry Impact and Future Outlook - The governance is expected to pressure companies that have relied on high pricing and marketing costs, pushing them to focus on cost control, process innovation, and genuine clinical value [1][9] - The combination of "volume-based procurement + price governance" is seen as a key path to standardizing drug prices, addressing unreasonable premiums in the distribution chain [11] - Long-term, companies with strong compliance and cost advantages are likely to dominate the market, while smaller firms may face elimination risks if they cannot achieve scale and quality standardization [12] Group 3: Specific Products and Companies Affected - Notable TCM products such as Xiao Chai Hu Granules, Niu Huang Jie Du Pian, and Ban Lan Gen Granules are included in the governance list, with specific pricing adjustments mandated [8][9] - Well-known companies like Shandong Hongjitang Pharmaceutical Group and Taiji Group's subsidiaries are among those named in the governance actions [8][11] - A-share listed company Keyuan Pharmaceutical is planning to acquire 99.42% of Hongjitang, indicating potential consolidation in the industry [8]