Jinxin announced the acquisition of an ARS provider in Laos in order to meet the medical tourism demand of Chinese patients. We expect revenue from Laos to start from 2Q20E and contribute RMB17mn/49mn revenue in FY20/21E. We slightly revised up our FY20E/21E earnings forecast by 1%/2% to reflect revenue contribution from clinics in Laos and lift our DCF-based TP to HK$15.4. Maintain BUY.
- ARS institutions in Laos enjoy favorable regulatory environment. Jinxin announced the acquisition of IVF licenses from Rhea International Medical Centre (Rhea) in Laos. Jinxin plans to set up a new 5,000 sq m IVF-licensed clinic in Laos by 3Q20E. Jinxin will provide a full range of services in Laos, including IVF-ET, ICSI, PGS/PGD, third party IVF, egg and sperm cryopreservation, etc. The clinic in Laos will have a capacity of over 3,000 IVF treatment cycles per year. We estimate it will contribute 1,000 IVF treatment cycles in FY22E with an ASP of RMB80,000-100,000 per cycle. The clinic is about four hours from Kunming city via the high-speed railway and is well positioned to meet medical tourism demand of Chinese patients.
- Lifted FY20E/21E earnings forecast by 1%/2%. We forecast clinics in Laos will complete 200/550 IVF treatment cycles in FY20E/21E, while the average treatment cost per cycle will be RMB85,000/RMB89,250 in FY20/21E (vs. around RMB50,000 in China), thanks to more value-added services provided in Laos. We expect total revenue contribution from Laos will be RMB17mn/ RMB49mn in FY20E/21E. Therefore, we revised up FY20E/21E revenue forecasts by 1%/2% and lift attributable net profit forecasts by 1%/2%.
- Maintain BUY with new TP of HK$15.4. We expect Jinxin to deliver 36.9% CAGR in revenue FY18-21E, mainly thanks to solid organic growth and consolidation of HRC. Jinxin had around RMB3bn cash on hand which provides sufficient capital for acquisition. We derive TP of HK$15.4 based on 8-year DCF model (WACC:9.5%, terminal growth rate: 4%).
- Catalysts: Acquisitions of quality assets; Risks: weak organic growth.
