On August 20, Ping An Health shared its financial results for the first half of 2024, marking a significant milestone: the company reported its first profit since its founding, a testament to the success of years of strategic reform.
Revenue for the first half came in at RMB 2.093 billion (USD 294 million), a 5.8% decline from the previous year. Despite challenges like delayed revenue from business model shifts and a high comparison base, the narrowing year-on-year (YoY) decline stands out as a key highlight in this report.
Ping An Health posted a net profit of over RMB 600 million (USD 84.3 million), with adjusted net profit nearing RMB 100 million (USD 14.1 million). This marks the first time in the company’s ten-year history that it has turned a profit, a clear sign that its strategic direction is paying off.
| Item | 2024 (RMB Thousands) | 2023 (RMB Thousands) | YoY Change |
|---|---|---|---|
| Revenue | 2,093,449 | 2,222,177 | -5.8% |
| Cost of Goods Sold (COGS) | (1,419,651) | (1,506,815) | -5.8% |
| Gross Profit | 673,798 | 715,362 | -5.8% |
| Selling, General and Administrative Expenses (SG&A) | (366,722) | (450,346) | -18.6% |
| General and Administrative Expenses (G&A) | (394,613) | (756,671) | -47.8% |
| Research and Development (R&D) Expenses | (161,333) | (331,590) | -51.3% |
| Other Income | 18,284 | 55,274 | -66.9% |
| Net Other Income | 27,737 | 79,291 | -65.0% |
| Net Finance Income | 102,436 | 115,242 | -11.1% |
| Share of Losses from Joint Ventures and Associates | (268) | (2,415) | -88.9% |
| Profit Before Tax (PBT) | 60,652 | (244,263) | N/A |
| Income Tax Expense | (23) | (604) | -96.2% |
| Net Income | 60,629 | (244,867) | N/A |
| Net Income Attributable to Shareholders | |||
| Equity Holders of the Parent | 56,648 | (244,618) | N/A |
| Non-controlling Interests (NCI) | 3,981 | (249) | N/A |
| Adjusted Net Income | 89,739 | (249,267) | N/A |
Elderly care as a growth driver
Ping An Health’s profitability in the first half of 2024 is underpinned by strong revenue quality. As the company delved deeper into its 2.0 strategy, reforms focused on optimizing low-synergy businesses. Since the start of the year, strategic businesses have shown steady growth, with high-synergy operations significantly offsetting the negative impact of a shrinking business scale. This is a major reason behind the substantial narrowing of the YoY revenue decline.
This reduction in revenue decline essentially reflects the fruition of strategic reforms, despite the challenges. It suggests that the actual revenue growth for the period might be somewhat understated.
The core outcomes of the company’s strategic reforms are most evident on the cost side, particularly in significant improvements in personnel efficiency and cost-effectiveness. Business structure reforms, which prioritize high-synergy areas, have involved continuous optimization of resources and personnel, alongside the integration of digital tools, AI, and other technologies to enhance operational efficiency. This has led to sustained cost reductions.
In this period, sales expenses dropped by 18.6% YoY, while management expenses, including R&D, fell by 47.8% YoY. The sales expense ratio for the first half was recorded at 17.5%, and the management expense ratio declined to 18.9%, a 15-percentage-point drop YoY. The significant reduction in management expenses is the main driver behind the overall decrease in the company’s expense ratio.
The key factor behind Ping An Health’s profitability in the first half of 2024 is its 2.0 strategy. As revenue gradually stabilized through the rapid expansion of high-synergy businesses, significant reductions in expenses—driven by improved personnel efficiency—led to a substantial decrease in expense ratios, culminating in a better-than-expected return to profitability.
While cost control played a crucial role in this period’s profitability, it is fundamentally a result of strategic reforms that have improved operational efficiency and optimized resource allocation. Going forward, the company’s performance will depend more on the growth potential of its strategic businesses rather than on cost control alone.
One of the biggest highlights in this financial report is the separation of the elderly care business from the company’s broader medical and health services. This reclassification clarifies the business structure, aligns it with strategic reforms, and helps the capital market better understand the company’s business model, leading to more accurate assessments of its future potential.
In terms of performance, the elderly care business generated RMB 47.31 million (USD 6.6 million) in revenue in the first half of 2024, representing a YoY growth rate of 205%. While this high growth rate benefits from a low comparison base, the positive outlook for the elderly care market is also a core driver of this performance. The gross profit margin of the elderly care business also saw a significant increase, driving the company’s overall performance growth.
| Category | 2024 (RMB Thousands) | 2023 (RMB Thousands) | YoY Change |
|---|---|---|---|
| Revenue | |||
| Medical Services | 1,062,743 | 1,031,559 | +3.0% |
| Health Services | 983,392 | 1,175,093 | -16.3% |
| Elderly Care Services | 47,314 | 15,525 | +204.8% |
| Total Revenue | 2,093,449 | 2,222,177 | -5.8% |
| Gross Profit | |||
| Medical Services | 422,236 | 443,888 | -4.9% |
| Health Services | 243,573 | 270,957 | -10.1% |
| Elderly Care Services | 7,989 | 517 | +1,445.3% |
| Total Gross Profit | 673,798 | 715,362 | -5.8% |
| Gross Profit Margin | |||
| Medical Services | 39.7% | 43.0% | -3.3 p.p. |
| Health Services | 24.8% | 23.1% | +1.7 p.p. |
| Elderly Care Services | 16.9% | 3.3% | +13.6 p.p. |
| Total Gross Profit Margin | 32.2% | 32.2% | N/A |
In the past, strategic reforms primarily focused on the commercial insurance and corporate health management segments. As these reforms deepen, the value of the commercial insurance and elderly care business model has become increasingly apparent. The positive outlook for the company’s elderly care business is supported by several factors: clear policy support, enormous market potential, and low penetration rates in the elderly care sector, all of which provide a strong foundation for future growth.
Public data indicates that China’s elderly care market was valued at approximately RMB 7 trillion (USD 983.3 billion) in 2023 and is expected to grow to RMB 30 trillion (USD 4.2 trillion) by 2035, with a compound annual growth rate (CAGR) of 14%. Recent policies have consistently promoted the development of the silver economy, guiding the elderly care industry toward more standardized, scalable, clustered, and branded growth. Given China’s national conditions, future elderly care products are likely to lean toward public and large-scale solutions.
The alignment of elderly care policies with China’s national conditions provides significant benefits to companies that follow these policy directions. As a pioneer in the elderly care industry, Ping An Health not only holds a first-mover advantage but also aligns its long-term development strategy with policy-driven trends of standardization, clustering, branding, and public and large-scale solutions.
At the product level, Ping An Health’s elderly care services are anchored around specialized butlers designed to cover a range of scenarios including medical care, daily living, nursing, and entertainment. This approach delivers a standardized, diversified, and comprehensive one-stop service system for users.
The company is currently advancing in two major directions: first, by developing a “three-in-one” elderly care butler system, and second, by launching four key alliance models—medical alliances, residential alliances, nursing alliances, and entertainment alliances. As for branding, Ping An Health already boasts significant brand strength in medical care, health, and elderly care, and the high-quality services it provides will further enhance its brand reputation.
Ping An Health’s growth outlook
Assessing Ping An Health’s future growth potential fundamentally depends on the expansion of its strategic businesses, with the elderly care business as a key marginal force.
Financial data shows that the company’s strategic businesses achieved a YoY revenue growth of 19.7% in the first half of 2024. F-end strategic business revenue reached RMB 1.152 billion (USD 161.8 million), up 3.4% YoY, while B-end strategic business revenue reached RMB 713 million (USD 100.1 million), up 58.8% YoY. The number of F-end paying users was approximately 14.8 million in the first half, up 7% YoY, while B-end paying users reached about 2.6 million, up 2%. During the same period, the cumulative number of enterprises served by the B-end reached 1,748, up 46% YoY.
The data suggests that the penetration rates of F-end and B-end strategic businesses remain relatively low, leaving significant room for future growth. In terms of short-term performance, F-end revenue growth has shown some signs of slowing, mainly due to the current economic environment and seasonal factors. However, the synchronized high growth in B-end revenue and customer numbers indicates that the high growth potential of strategic businesses is gradually being realized.
As Ping An Health’s strategic reforms progress, the emphasis is shifting from cutting costs to boosting operational efficiency. Moving forward, the company’s growth will hinge on unlocking the full potential of its strategic businesses.
Given the positive outlook for the company’s strategic businesses, as the short-term negative impacts of strategic reforms and business transformation fade, revenue growth—driven by F-end and B-end strategic businesses—is expected to regain momentum. On the business side, the strong growth of the elderly care segment is expected to contribute positively to margins, while expense ratios are anticipated to remain stable. As a result, the certainty of sustained profitability and high growth in the company’s net profit appears strong.
Currently, Ping An Health’s valuation is at a historic low, significantly deviating from its fair value. This is partly due to the overall downturn in the medical industry and partly due to significant fluctuations in liquidity in Hong Kong and overseas markets. However, with the company having achieved profitability and with positive expectations for future performance growth, the foundation for a revaluation is already in place.
The core factors supporting the company’s valuation include not only positive business expectations but also the inherent synergy between its operations and those of the Ping An Group. This synergy reflects the realization of intrinsic advantages, which form a significant moat for the company. These advantages, coupled with the unique business model of combining finance with medical and elderly care, and insurance with health management, make Ping An Health a rare asset in the capital market.
With positive performance expectations and the scarcity of assets, the potential for upward valuation adjustments is clear. Moreover, as a new round of overseas interest rate cuts begins, Ping An Health, with its strong technology attributes, stands to benefit. Given its historically low stock price and significantly undervalued valuation, short-term opportunities for valuation recovery are likely, catalyzed by both external factors and positive expectations. In the long term, the company’s solid fundamentals and unique business model provide strong support for its enduring investment value.
KrASIA Connection features translated and adapted content that was originally published by 36Kr. This article was written by Xiao Xi for 36Kr.