Meinian Onehealth Reports H1 2018 Net Profit of RMB 167 Million, Surging 998% Year-over-Year

VCBeat (WeChat ID: vcbeat)News: Recently, Meinian Onehealth (002044), a leading enterprise in the health checkup industry, released its 2018 semi-annual performance preview, reporting another significant increase in revenue and profit.

In the first half of 2018, the Company achieved total operating revenue of RMB 3.490 billion, representing a year-on-year increase of 57.66%; operating profit amounted to RMB 313 million, up by 516.57% year on year; total profit reached RMB 312 million, increasing by 524.06% compared with the same period last year; net profit attributable to shareholders of the listed company was RMB 167 million, surging by 998.00% year on year; basic earnings per share stood at RMB 0.05, doubling by 100.00% from the previous year. As of the end of the first half of 2018, the Company’s total assets totaled RMB 14.747 billion, an increase of 18.17% from the beginning of 2018.

Financial Data of Meinian Onehealth for the First Half of 2018

The semi-annual report shows that the main reason for the significant growth in Meinian Onehealth's operating performance in the first half of 2018 was still market demand.

As major national preventive medicine policies are successively implemented and health consumption continues to upgrade, the medical checkup industry is experiencing robust market demand, showing an explosive growth trend.

In the first half of 2018, Meinian Onehealth continued to expand its scale. While consolidating and developing the group examination market, it actively expanded into the individual examination and value-added services markets.

The product portfolio has been further expanded, and quality services have been upgraded once again. A series of new high-end health checkup products, including genetic testing, early cancer screening, coronary MRI, and liver ultrasound, have been successively launched. Revenue has maintained rapid growth, the proportion of individual checkups has continued to rise, and the product structure has been further optimized, truly achieving simultaneous growth in both volume and price. This has further bolstered the profits of the listed company and continuously strengthened its core competitiveness.

Rapid expansion and scaling up of health checkup centers have become Meinian’s “winning formula.”

According to the 2017 annual report, as of the end of 2017, the company operated a total of 378 health examination centers. Meinian Onehealth held controlling interests in 146 centers and minority stakes in 155; Ciming Health Checkup held controlling interests in 60 centers and minority stakes in 5; Meizhao Health Checkup held controlling interests in 2 centers and minority stakes in 3; and Aoya Health Checkup held minority stakes in 7 centers.

The Q1 2018 report shows that 19 new check-up centers were integrated in the first quarter. As the opening of check-up centers is generally concentrated in the third and fourth quarters, the pace of new additions in the second half of the year is expected to be faster than in the first half. The target of reaching 600 check-up centers by the end of this year, as projected in the annual report at the beginning of the year, is likely to be achieved. Furthermore, Meinian Onehealth aims to establish 1,000 check-up centers by 2020.

Scale expansion has driven rapid growth in the number of health checkups. Meinian Onehealth’s nationwide chain model and its multi-district layout have increasingly targeted B-side clients, providing more options and travel convenience for customers to undergo checkups nearby.

In 2017, Meinian Onehealth conducted 21.6 million health checkups, a year-on-year increase of 44%. The number is expected to reach 30 million in 2018 and cover 100 million person-times by around 2021, indicating substantial growth potential.

It is generally believed that the first half of the year, particularly the first quarter, represents the traditional off-season for the health checkup industry. Since the first quarter of last year, Meinian Onehealth has intensified its promotional efforts during this period, resulting in a 10% increase in the average transaction value per customer in 2017. In the first quarter of 2018, promotions focused on high-end testing services, driving the proportion of individual checkups to 44%. The full-year share of individual checkups is projected to reach 30%.

In terms of profit, the company reported a loss of RMB 98 million in Q1 2018, a 7% narrowing of losses. In Q2, it achieved a net profit attributable to shareholders of the parent company of RMB 265 million, representing a year-on-year increase of 98%.

Beyond the growth driven by scale expansion, another key factor lies in the company’s active expansion into the individual health checkup and value-added services markets. This is reflected in the further enrichment of product offerings, the upgrading of service quality, and the optimization of the product mix driven by new high-end health screening products such as genetic testing, early cancer screening, coronary magnetic resonance imaging (MRI), and liver ultrasound.

Following the launch of the “3650 Package” and capsule gastroscopy, we have introduced premium health screening services such as coronary MRI, genetic testing, capsule gastrointestinal endoscopy, and early Alzheimer’s disease detection. In partnership with Zhifei Biological Products, we have also launched value-added services for cervical cancer vaccines, thereby meeting users’ diverse healthcare needs.

According to Pacific Securities' pharmaceutical research report, primary care regions are a key focus area for Meinian Onehealth's strategic layout. Overall:

1) Meinian Onehealth has basically surpassed the level of local public hospital physical examination centers in grassroots cities, leading competitors in scale, capacity, discounts, and customer acquisition. Based on the company’s comprehensive expansion into third-, fourth-, and fifth-tier cities, we are optimistic about its future strategic layout and growth potential.

2) The performance evaluation metrics for the physical examination centers have been refined; the Group demonstrates strong capabilities in refined management, ensuring the achievement of performance targets.

3) Standardized replication has been achieved in primary care health examination centers, with a trend toward shortened payback periods.

4) New offerings and technologies, such as genetic testing, remote image interpretation, capsule gastrointestinal endoscopy, sleep apnea testing, and early Alzheimer’s disease screening, have been implemented at the primary care level, serving as effective means to boost both the volume and pricing of health checkups.

References:

Cninfo: 2018 Semi-Annual Performance Preliminary Estimatehttp://www.cninfo.com.cn/cninfo-new/disclosure/fulltext/bulletin_detail/true/1205232332?announceTime=2018-07-27