Huachuang Securities issued a research report stating that domestic assisted reproductive technology (ART) has been fully integrated into medical insurance coverage, and combined with fertility subsidies and other supportive policies, the industry penetration rate is expected to accelerate. As an industry leader, JXR (01951) maintains significant brand and licensing advantages, with short-term business disruptions not altering its long-term growth trajectory. The firm forecasts company revenues of 26.02/28.67/31.78 billion yuan for 2025-2027, with adjusted net profit attributable to shareholders projected at 2.82/3.25/3.76 billion yuan. The firm sets a target share price of HK$3.23 and maintains a "Buy" rating.

Key points from Huachuang Securities:

**Financial Performance Overview** The company released its mid-2025 results. For 2025, JXR achieved revenue of 12.89 billion yuan (-10.7%), with net loss attributable to owners of 1.04 billion yuan. Non-IFRS adjusted net profit reached 0.82 billion yuan (-68.3%), while operating cash flow was 2.68 billion yuan (-30.2%).

**Revenue Under Pressure with Regional Performance Divergence** JXR achieved revenue of 12.89 billion yuan (-10.7%) in H1 2025. By region:

Chengdu region medical services revenue reached 7.68 billion yuan (-13.1%), with 7,111 egg retrieval cycles (-6.1%). The decline in cycles was primarily attributed to reduced first-time patients and a significant increase in the proportion of intrauterine insemination (IUI) cycles, with IUI patients growing more than threefold to 969. A business highlight was the continued improvement in VIP penetration rate at Sichuan Jinxin Xinan Hospital (Bisheng Campus) to approximately 20.8%.

Greater Bay Area medical services revenue was 2.06 billion yuan (-14.9%), with 2,539 egg retrieval cycles (-16.0%). The cycle reduction was similarly affected by clinical consultation process changes and a substantial increase in IUI cycle proportions.

Kunming and Wuhan business revenue reached 1.31 billion yuan (+0.8%), maintaining steady performance. Egg retrieval cycles totaled 2,059 (-3.5%), mainly due to short-term operational impact from hospital renovation and upgrades.

Overseas business medical services revenue achieved 4.05 billion yuan (+3.7%). HRC Medical recorded 2,058 egg retrieval cycles (-8.9%), primarily affected by China-US relationship fluctuations and delayed implementation of California's IVF insurance coverage bill (SB729), causing some patients to postpone treatment.

**Business Structure Adjustments and One-time Impairments Pressure Profits** The company's gross margin for H1 2025 was 30.4% (-10.0pct). The margin decline was influenced by two main factors: 1) Revenue decline: Increased proportion of lower-priced IUI patients among ART patients; reduced average cycle prices following medical insurance adjustments; declining fertility intentions led to a 24% decrease in traditional deliveries, reducing obstetric revenue. 2) Rising operational costs: HRC Medical business expansion in the US, with four new clinics adding personnel and operational costs;武汉锦欣医院 lease term adjustments accelerating renovation amortization; depreciation expenses related to the new building relocation in Shenzhen.

Additionally, goodwill and intangible asset impairments were another major cause of profit losses: H1 2025 saw total impairments of 9.93 billion yuan related to US and Laos operations. Of this, impairments related to HRC Management Group totaled 9.52 billion yuan, while impairments related to suspended Laos operations amounted to 401.7 million yuan.

**Risk Warnings:** ART industry penetration rate improvement falling short of expectations, overseas business expansion and integration risks, goodwill and intangible asset impairments.