MEINIAN ONEHEALTH(002044)：COVID-19 WEIGHS ON 1H22 RESULTS;BUSINESS EXPECTED TO IMPROVE GRADUALLY IN 2H22

　　1H22 results missed market expectations
　　Meinian Onehealth announced 1H22 results: Revenue fell 13.48% YoYto Rmb2.92bn; attributable net loss equaled Rmb666mn, with an EPS of-Rmb0.17; and recurring attributable net loss dropped to Rmb695mn compared to Rmb376mn in 1H21. The firm’s results missed market expectations, as COVID-19 conditions weighed on foot traffic at its health examination centers.
　　Trends to watch
　　COVID-19 weighs on 1H22 results; to ramp up in 2H22. Meinian Onehealth’s revenue fell 13.5% YoY to Rmb2.92bn in 1H22, and that in 2Q22 dropped 23.2% YoY to Rmb1.57bn, as store closures or restrictions weighed on the ramp-up of the firm’s capacity due to COVID-19 resurgence in multiple regions in China. The firm booked a loss of Rmb235mn in 2Q22, while its attributable net profit largely broke even in 2Q21. As a result, Meinian Onehealth’s results came under pressure. We believe the COVID-19 resurgence has imposed a sharp impact on the firm’s results, as it shut down more than 150 health examination centers across the country for over 40 days, on average. However, the firm’s fixed expenses only declined mildly; thus, its profit was under pressure. We expect Meinian Onehealth’s business to recover and pent-up demand to gradually release when COVID-19 conditions improve.
　　Health examination centers expand steadily; per-customer sales recover. In 1H22, Meinian Onehealth added two new health examination centers, with the total number reaching 615, of which 285 were controlled by the firm. According to the firm, the number of medical checkups rose 5% YoY in January-February, and per-customer sales grew 12% YoY, driving revenue up by 17% YoY. The number of medical checkups totaled 12.25mn in 1H22, down 7% YoY due to COVID-19 resurgence. However, the proportion of group clients fell 2ppt YoY to 76%, and the rising percentage of individual clients boosted per-customer sales to grow 3% YoY to Rmb514. We expect the firm’s per-customer sales to recover gradually with the increasing proportion of individual clients.
　　Operating quality under pressure in 1H22. Meinian Onehealth’s 1H22 gross margin (GM) fell 9.2ppt YoY to 19.5%. Sales expense ratio rose 1ppt YoY to 27.5%, and G&A expense ratio grew 3.2ppt YoY to 12.2%. We attribute the changes in GM and expense ratios to the sharp COVID-19 impact on the firm’s 1H22 revenue. We expect Meinian Onehealth’s GM and expense ratios to gradually improve when COVID-19 conditions improve.
　　Financials and valuation
　　We lower our 2022 and 2023 EPS forecasts 74.6% to Rmb0.03 and 14.7% to Rmb0.11, as COVID-19 conditions may weigh the ramp-up of the firm’s capacity. We maintain an OUTPERFORM rating but cut our discounted cash flow (DCF)-based TP 16.7% to Rmb6.00 as we believe the industry-wide impacts of the COVID-19 pandemic on demand in the long term is manageable, offering 26.85% upside.
　　Risks
　　Risks related to management of chain stores; uncertainties over new management.
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   【免责声明】本文仅代表第三方观点，不代表和讯网立场。投资者据此操作，风险请自担。