CICC has maintained its adjusted net profit forecasts for JXR at RMB 276 million and RMB 357 million for 2026 and 2027, respectively. The current share price implies a 2026-2027 P/E ratio of 20.2x and 15.4x based on adjusted profits. The firm reiterated an "Outperform" rating and a target price of HK$3.50, which corresponds to 2026-2027 P/E multiples of 31.1x and 23.7x, suggesting a potential upside of 50.9% from the latest closing price.

CICC's key observations are as follows:

The company's 2025 results met expectations, with revenue of RMB 2.649 billion and adjusted net profit of RMB 209 million. A significant operational recovery was observed in the second half of the year, supported by stabilization in the domestic assisted reproduction market.

In the second half of 2025, both business volume and profitability rebounded strongly. The number of egg retrieval cycles increased by 3.1% quarter-on-quarter, while adjusted net profit rose by 54.9% quarter-on-quarter. The inclusion of assisted reproduction in medical insurance policies helped boost the penetration rate of third-generation IVF, as seen in the Chengdu facility where such cycles surged 72.8% year-on-year. The proportion of VIP services also increased to 21.2%, effectively offsetting pricing pressure on standard services and driving structural optimization and steady operational recovery during the policy benefit period.

Capacity expansion and policy tailwinds are creating synergies, while digital and AI technologies are strengthening the company's core competitive advantages. According to the company's earnings call, the new building at Shenzhen Zhongshan Maternity Hospital has begun operations, increasing cycle capacity approximately fourfold. Cycle numbers for January-February 2026 grew 18% year-on-year, and the company expects revenue to double within five years.

In the U.S. market, JXR added seven medical experts in 2025, contributing to a 5.1% increase in management revenue. Following the implementation of a commercial insurance bill in California, HRC reported a 38% rise in cycle numbers for January-February 2026. The company is actively restructuring its U.S. operations to improve capital efficiency and plans to expand its physician network to 40 professionals, with scale benefits expected to materialize in 2026.

On the technology front, the company's self-developed AI system now covers the entire diagnosis and treatment process, enhancing clinical success rates and operational efficiency through digital and AI transformation.

Capital expenditure is entering a contraction phase, supported by strong cash flow and a commitment to shareholder returns. In 2025, operating cash flow reached RMB 589 million, while comprehensive debt costs declined to 4.36%. The company expects capital expenditure to fall below RMB 50 million in 2026, which is anticipated to significantly boost free cash flow.

JXR remains focused on shareholder returns, having approved a shareholder return plan for 2026-2028 that allocates 50%-80% of adjusted EBITDA to dividends and share repurchases. For 2026, the company plans to execute a RMB 300 million buyback and distribute RMB 100 million in dividends.

Risks include slower-than-expected industry demand growth, increased competition, policy changes, and unexpected medical incidents.