Financial reporter Wang Beibei
Yingkang Life, which has been losing money for two consecutive years, finally handed over a brilliant report card in 2023.
On the evening of April 21, the 2023 annual report released by Yingkang Life showed that its revenue and profit reached a new high, of which the revenue was 1.471 billion yuan, a year-on-year increase of 27.20%, the highest growth rate since 2019, and the compound annual growth rate of revenue from 2019 to 2023 was 26.58%, and the net profit attributable to shareholders of listed companies was 100 million yuan, a year-on-year increase of 116.85%, and a year-on-year increase of 39.40% after excluding the impact of goodwill impairment of 668 million yuan in the same period last year.
2023 is a year of high-quality development of Yingkang Life, and the financial report shows that the annualized compound growth rate of the company's revenue and net profit attributable to the parent company (after excluding goodwill) in the past five years is 26.6% and 40.9% respectively, of which the year-on-year growth rate in 2023 exceeds the compound growth rate in the past five years.
Yingkang Life's revenue scale has increased significantly, its profitability has steadily improved, its asset quality has been continuously optimized, and its operational resilience and high-quality development trend have been further highlighted. As of the close of trading on April 23, 2024, Yingkang Life closed at 7.75 yuan per share, up 2.24%.
Revenues from medical services are at an all-time high
The main business of Yingkang Life is to focus on building an ecological platform for the whole industry chain of pre-diagnosis, treatment and rehabilitation, and to provide R&D, innovation and services of medical services featuring tumors, key scenarios, key equipment and medical devices. In 2023, Yingkang Life Medical Services will achieve revenue of 1.149 billion yuan, an increase of 15.28% year-on-year, and the revenue of medical services will exceed the highest level in history in 2021, and the number of surgeries will reach 24,178, an increase of 20% year-on-year.
According to the annual report, Yingkang Life adopts the hospital business model of "hospital-ecology-platform". By expanding and strengthening the regional medical center, we will provide patients with high-quality medical services for diagnosis and treatment in the hospital, and at the same time sink high-quality medical resources into the community, build a 1→n medical resource sharing network, and link ecological resources to build value-added service capabilities for subdivided disease groups around the health service needs of patients such as pre-hospital and post-hospital prevention and rehabilitation, so as to realize the closed-loop service network of H2H (from hospital to home).
As of the end of the Reporting Period, Yingkang Life operated and managed 7 hospitals, including Sichuan Friendship Hospital (Grade 3A), Suzhou Guangci Cancer Hospital (Grade 2) and Chongqing Huajian Friendship Hospital as the internal operating hospitals of the listed companies, and Shanghai Yongci Rehabilitation Hospital, Yuncheng Hospital (Grade 3A/formerly Yingkang Yuncheng Hospital Co., Ltd.), Shanghai Yingkang Nursing Home and Shanghai Qingpu District Xujing Nursing Home as trustee hospitals.
In terms of the core competitiveness of medical services, Yingkang Life focuses on the construction of a university system with oncology characteristics and continuously improves its medical service capabilities, the second is to seize the opportunity of the development of the silver economy and strengthen the positioning of regional medical centers, and the third is to build a comprehensive smart medical service ecology through digital transformation.
Taking oncology medical services as an example, Ying Kang Life's focus on this field can be said to be in line with the rhythm of the times. The mainland oncology medical service market is expected to continue to maintain high growth. According to the latest data from the National Cancer Center, the number of new cancer cases in mainland China in 2022 is estimated to be 4,824,700, and the overall incidence of cancer is on the rise. According to Frost & Sullivan data, the growth rate of medical service revenue of private cancer hospitals is significantly higher than that of public cancer hospitals, and it is expected that the revenue of private cancer hospitals is expected to reach 106.7 billion yuan in 2025, and the overall cancer medical service market will increase to 700.3 billion yuan.
In order to further improve cancer medical services, during the reporting period, Yingkang Life established a full-scene and full-course management of pre-hospital + post-hospital pre-diagnosis and treatment of tumors. It is worth mentioning that Suzhou Guangci Cancer Hospital was rated as a second-class first-class cancer hospital during the reporting period, and the oncology department was rated as a key clinical specialty in Suzhou. Its oncology business revenue was 167.9352 million yuan, and the number of outpatient visits, hospital admissions and surgeries remained stable, with the number of third- and fourth-level surgeries accounting for more than 70%. The second phase of the hospital will be put into use in 2024, focusing on high-end characteristic oncology comprehensive medical services, which is expected to open up new growth space for the hospital.
In 2023, Yingkang Life Oncology will have a full-scenario revenue of 325.7311 million yuan, accounting for 28% of the revenue of medical services.
Medical device mergers and acquisitions to improve profitability
At present, the investment and mergers and acquisitions of domestic medical devices and even the big health industry are surging. Wind data shows that so far in 2023, companies in the big health industry have disclosed a total of 107 mergers and acquisitions and restructuring plans, of which 82 involve asset purchases, and Yingkang Life is one of the representative companies.
In 2022, Yingkang Life completed the merger and acquisition of Shenzhen Shengnuo Medical, and in November 2023, Yingkang Life acquired 70% of the equity of Uniplan for 124 million yuan, realizing the closed-loop scenario of high-pressure infusion scene equipment + consumables two-wheel drive. At present, Yingkang Life has upgraded from a single Gamma Knife product to four scenarios: radiation therapy, life support, image enhancement, and chronic disease treatment.
It can be said that the merger and integration effect of Yingkang Life Medical Devices is remarkable. During the reporting period, through the acquisition of Shenzhen Uniplan, Yingkang Life further improved the scenario layout of high-pressure infusion equipment and consumables, and further enhanced its ecological competitiveness: the number of high-pressure syringe syringe consumables models increased rapidly from 6 to 63 categories (compared with self-development, the certification time was shortened by 2-3 years), which can basically adapt to the mainstream high-pressure syringe products in the industry, which greatly improves the market space.
With the gradual deepening of mergers and acquisitions, the revenue of Yingkang Life's medical device segment in 2023 will be 322 million yuan, a year-on-year increase of 101.69%, and a three-year compound growth rate of 128.1%.
"Focusing on the key scenarios and equipment layout of tumor treatment, Yingkang Life has integrated industry-leading industries with strong scientific and technological innovation attributes through mergers and acquisitions, quickly occupied a place, and completed the industry layout. The person in charge of Yingkang life-related business said. According to the publicly disclosed information, Yingkang Life relies on the existing four major scenarios to carry out mergers and acquisitions, and there are several directions for screening targets: first, domestic substitution, the main products of the target company should be in the early stage of the growth period or maturity period; second, it has certain scientific and technological innovation attributes, and the company has core technologies or talents; third, it has a certain scale and profitability, which can contribute stable cash flow; fourth, the relevant subdivision track has a certain space for scene integration, and uses Haier's integration capabilities and brand influence to further enhance the market scale.
Industry insiders said that there are many subdivisions in the medical device industry, and the product types are complex, and enterprises often face the ceiling of industry segments, and enrich the product matrix through mergers and acquisitions, which has almost become the only way for the development of various enterprises. For example, Johnson & Johnson has established leading positions in orthopedics, surgery, ophthalmology, and interventional solutions through multiple acquisitions, while Medtronic, the global king of medical devices, has acquired more than 40 companies in market segments over the past 30 years. Through long-term mergers and acquisitions and restructuring, Yingkang Life continues to expand its product line and enter new business areas, which promotes the sustainable growth of the business and the improvement of profitability.
The risk of goodwill impairment remains
"The performance of several M&A targets is very good, and I have to admire Haier's strategic vision. "Some shareholders told reporters that in 2023, Shenzhen Shengnuo's revenue will be 225 million yuan, an increase of 31.30% year-on-year, and the net profit will be 40.0478 million yuan, an increase of 449.71% year-on-year, and the gross profit margin will increase by 2.59%; Suzhou Guangci Hospital will ......have a revenue of 538 million yuan, a net profit of 62.8052 million yuan, and a performance commitment completion rate of 105.88%; These companies happen to be the majority of the goodwill of Yingkang Life, and from the current performance trend, the performance of these companies is good, and the impairment risk is slowly decreasing. The shareholder said.
Mergers and acquisitions also led to an increase in expenses. In 2023, Yingkang Life's sales expenses will be 63,211,800 yuan, a year-on-year increase of 129.11%, Yingkang Life said that this is due to the increase in mergers and acquisitions of new companies at the end of 2022 and 2023, and with the increase in mergers and acquisitions of new companies, Yingkang Life's R&D expenses in 2023 will be 52,238,700 yuan, also a year-on-year increase of 86.35%. In terms of overall profitability, the gross profit margin of Yingkang Life in 2023 will be 28.57%, a year-on-year increase of 2.04%, and the net profit margin will be 6.74%.
Yingkang Life said that in the future, it will continue to increase investment in the medical and health field and build its internal core competitiveness, and accelerate the layout and development of the whole industry chain of tumor pre-diagnosis/treatment/rehabilitation. In terms of medical services, we are committed to deepening the construction of university departments with tumor characteristics and expanding the medical service ecology, while in terms of medical devices, we will continue to enrich product categories around key scenarios and key equipment for tumor prediagnosis and treatment, promote innovation through R&D investment, deepen digital transformation, improve the level of intelligence, and optimize the product and service ecology.
It can be seen that the road of acquisition and integration of Yingkang Life will continue in the future. The annual report mentions that in April 2023, Yingkang Life acquired Yingkang Life Tongdayi (Xiamen) Information Technology Co., Ltd., which filled the vacancy in the digital-related industries of medical services and contributed to the revenue of system development and integration.
However, with the development of mergers and acquisitions, the goodwill brought by the newly purchased assets has not completely eliminated the goodwill impairment risk of Yingkang Life. Yingkang Life said in the annual report that the company's acquisition of new businesses and the company's goodwill impairment may occur, and the company will put forward a proactive plan for possible contingent risks to reduce the overall impact on the company's operating business.