Sinohealth Technology Holdings (2361) H1 2023 earnings summary

Executive summary

• H1 2023 revenue rose 19.6% YoY to RMB144.95m; net profit increased to RMB46.97m from RMB5.29m, supported by higher gross profit and other income and gains.

• Gross margin expanded 5.2 percentage points to 51.9%; Smart Decision Cloud led growth, while Smart Retail Cloud revenue declined after lower-margin product adjustments.

• Corporate customers reached 842, the pharmacy network covered 70,089 stores, and Smart Medical Cloud served over 200,000 patients. ### Financial highlights

• Revenue was RMB144.95m, up 19.6% YoY; gross profit rose 32.7% to RMB75.18m, while cost of sales increased 8.1% to RMB69.77m.

• Profit before tax rose to RMB47.89m from RMB3.93m; profit for the period was RMB46.97m versus RMB5.29m, and EPS was RMB0.11 versus RMB0.01.

• Other income and gains increased to RMB35.82m, mainly from foreign-exchange gains and bank interest; administrative expenses fell 19.2% to RMB15.1m and R&D costs fell 4.5% to RMB27.2m.

• Operating cash flow was RMB47.46m versus RMB1.84m; investing cash outflow was RMB256.18m, mainly reflecting purchases of time deposits and financial assets. ### Outlook and guidance

• Priorities include scaling Smart Retail Cloud and Smart Decision Cloud, refining Smart Medical Cloud and Smart Health Management Cloud, and developing new profit growth drivers.

• Plans include broadening data collection and customer markets, improving data governance and products, and building a healthcare database spanning patients, pharmacies, hospitals, examinations, producers and insurance.

• Smart Health Management Cloud plans to broaden hospital and examination-center partnerships and extend AI-MDT and post-examination services to more users and cities; Smart Clinic Cloud may benefit from rural healthcare digitalization policies.

• Global Offering proceeds allocated to SaaS upgrades and technology/data-warehouse R&D are expected to be used by 31 December 2025. ### Segment performance

• Smart Decision Cloud revenue grew 32.6% to RMB72.1m; 461 corporate customers purchased services, with a 92.2% repurchase rate.

• Smart Retail Cloud revenue fell 5.2% to RMB43.8m after lower-margin product adjustments; 443 corporate customers purchased services and the repurchase rate was 79.7%.

• Smart Medical Cloud revenue rose 16.8% to RMB23.3m, mainly from patient management; services reached over 200,000 patients and the repurchase rate was 86.5%.

• Smart Health Management Cloud revenue increased 799.4% to RMB5.7m, mainly from AI-MDT; services reached over 160 hospitals, 650 private examination centers and over 200,000 paid users. ### Key financial ratios and metrics

• Gross margin increased to 51.9% from 46.7%; net profit margin rose to 32.4% from 4.4%.

• Gearing ratio was 18.2% at 30 June 2023, compared with 14.9% at 31 December 2022; there were no bank borrowings and lease liabilities totaled RMB16.7m.

• Cash and cash equivalents were RMB199.2m, down 51.3% from year-end; current and non-current time deposits totaled RMB483.0m. ### Risk factors and uncertainties

• US-dollar cash and deposits created foreign-exchange exposure; no hedging activities were in place.

• Net impairment losses on financial assets were RMB5.36m versus RMB1.02m; the trade-receivable loss allowance was RMB11.68m at 30 June 2023, up from RMB6.32m at year-end.

• Receivables were unsecured, with credit terms of 7–120 days; data security and privacy require full-lifecycle safeguards and ongoing compliance with changing laws and regulations. ### Significant events and developments

• A strategic cooperation agreement with Shenzhen Data Exchange was signed to explore healthcare data-circulation infrastructure and data trading.

• Corporate customers numbered 842, up 35.2% YoY; the repurchase rate among top-tier pharmaceutical and medical-device customers was 94.7%.

• The network covered 70,089 pharmacy stores across 339 cities in 30 provincial-level regions, up 10.8% YoY; SIC collected 176m retail sales entries, up 33.3%. ### Capital allocation and financing

• Operations were funded mainly by operating cash flow, with Global Offering proceeds also intended to support expansion; no bank borrowings were outstanding.

• Of HK$339.6m in net Global Offering proceeds, HK$20.8m had been used and HK$318.8m remained unutilized at 30 June 2023 for SaaS upgrades and technology/data-warehouse R&D.

• Capital expenditure was RMB1.7m, up 32.4% YoY; future capex is intended to be funded by cash balances, operating cash flow and offering proceeds.

• No interim dividend was declared; a final dividend of HK$3.98 cents per share was paid in July, and 1.166m shares were repurchased for the share award scheme during H1. ### Notes to the financial statements

• Other income and gains included RMB14.45m net foreign-exchange gains, RMB12.52m bank interest income and RMB8.21m government grants.

• One subsidiary lost its 15% high-tech preferential tax rate after not renewing its certificate and was taxed at 25% in H1 2023; another subsidiary qualified for a 15% rate. ### Market and industry conditions

• Data-element policies and establishment of the National Big Data Bureau were described as accelerating standardized data-market development and supporting healthcare digitalization.

• Aging, chronic disease prevalence and rising health awareness support demand for preventive, personalized and digitally enabled healthcare services.

• China conducts over 500m physical examinations annually, supporting potential growth in AI-MDT and post-examination health-management services.