Financial consolidation of Ping An Group, the synergistic effect is expected to continue to manifest in the future.

Recently, Ping An Health (01833) announced a plan to distribute a dividend of 10 billion yuan, attracting market attention. At the same time, major shareholder Anxin (an indirect wholly-owned subsidiary of Ping An Group) proposed a possible mandatory unconditional cash offer, in accordance with Rule 26 of the Takeover Code for a mandatory general offer for all offer shares, and in accordance with Rule 13 of the Takeover Code for a proper offer for all unexercised stock options, to cancel all unexercised stock options (regardless of whether they have vested). With this change in shareholding, Ping An Health will become an indirect non-wholly owned subsidiary of Ping An Group, and the financial performance of the company will be incorporated into the consolidated financial statements of Ping An Group. Financial consolidation, synergies within the group highlighted According to the offer, the acquisition of Ping An Health shares by Ping An Group is aimed at consolidating its control through the acquisition of shares. After the acquisition, Ping An Group's shareholding will increase from 39.41% to 52.74%. With the news of the acquisition, there are concerns in the market about the privatization of the company. However, in this announcement, the group clearly stated its intention not to re-deploy any fixed assets or terminate employees, to not privatize Ping An Health, and believes there is no reasonable possibility of privatization, hoping that Ping An Health will continue its existing core businesses, dispelling the biggest doubts in the market. It is worth mentioning that Ping An Group's plan to acquire Ping An Health shares through a share swap will benefit both the group and Ping An Health. On one hand, the share swap plan as an alternative to cash dividends allows the group to increase its stake in Ping An Health without incurring additional transaction costs; on the other hand, Ping An Health distributing dividends to its major shareholder in the form of shares will retain the cash it would have paid out as operating capital, further enhancing the company's risk management capabilities. Furthermore, with the completion of this acquisition, Ping An Health will maintain its independent operation while having a closer connection with the group, enabling it to fully leverage the group's abundant resources in finance, technology, and healthcare, thus consolidating its competitive position in the field of medical services and health management. It is understood that Ping An Health has been continuously developing its core hubs of "family doctors" and "caretakers for the elderly". It has now grown into a domestic professional and comprehensive one-stop provider of high-quality medical and health management services, serving as the flagship and entrance to Ping An Group's medical and elderly care ecosystem, which is the core of Ping An Group's strategy. In response to this, some industry insiders have expressed that with the future financial consolidation of Ping An Health, the synergies between the company as the flagship core and the group will be more highlighted. In the first half of 2024, the company's fundamentals are strong, achieving a half-year profit for the first time since going public, and Ping An Group's decision to consolidate Ping An Health at this time may indicate confidence in Ping An Health's future financial outlook. Deep cultivation of the elderly care sector, medical care business aligns with national strategy As the flagship of Ping An Group's medical and elderly care ecosystem, the company continues to deepen the construction of the core hubs of "family doctors" and "caretakers for the elderly" and has gradually developed a unique "management-oriented medical model" tailored to China. Li Dou, Chairman and CEO of the company, stated at the performance conference, "Commercial insurance + medical care for the elderly" and corporate health management are the two tracks that Ping An Health adheres to while deepening its work in the elderly care sector and are the foundation of the company's work. Data shows that during the "14th Five-Year Plan" period, China's population of people aged 60 and above will exceed 300 million. With the improvement in living standards and the enhancement of medical conditions, the physical fitness and life expectancy of the elderly in China have greatly improved, leading to an ongoing rise in the demand for quality of life. Due to cultural, economic, and other factors, the "9073" model is still the basic pattern of elderly care in China, with 90% of the elderly choosing to spend their later years at home. Therefore, there is an urgent need for a "Chinese-style" home care service that fits the current situation in Chinese society. In recent years, the Ministry of Civil Affairs has vigorously promoted the shift of the focus of elderly care services towards home and community care. On one hand, it has increased policy support and explored innovative service models in providing multi-level and diversified home and community care services, encouraged the development of community-based care institutions, and strengthened the supply capacity of home and community care services. The goal is to build a network of 500 exemplary community-based home care services during the "14th Five-Year Plan" period. In response to this background, Ping An Health has actively responded to social needs by innovatively launching the "Ping An Family Doctor" brand. In June of this year, the comprehensive upgrade of the family doctor brand "Ping An Family Doctor" was a major highlight, driving the transformation and upgrade of medical and health services towards "management", indicating the opening of a new chapter in the coordinated development of medical care and insurance businesses. Wu Jun, President of Ping An Health, stated that in the first half of 2024, Ping An Family Doctor and Ping An Life once again established a good model of medical insurance synergy, providing high-quality medical and health services for the sixth level of rights customers of life insurance clients who actively manage their health, manage chronic diseases well, and manage diseases throughout the process, which has been well received by the market and has exceeded expectations in empowering the core business. In terms of results, this unique management-oriented medical model has gained traction commercially. It is reported that in the first half of 2024, the company's revenue and user numbers at the front end doubled, with approximately 14.8 million paying users, representing a 7% increase year-on-year, bringing in revenue of 1.12 billion yuan, a 3.4% increase year-on-year. Ping An Health continues to deepen the synergy between medical care and elderly care services and insurance business through the construction of service scenarios in "insurance + medical and health", actively participating in the health management of policyholders. In terms of valuation, in the past month since Ping An Health announced dividends, the company's stock price has been hovering around 6.2-7 Hong Kong dollars, with the bottom close to confirming. Currently, the company's price-to-book ratio is less than 1, indicating that the stock is severely undervalued by the market. As the core flagship of Ping An Group's medical and elderly care ecosystem, the company's medical and elderly care business aligns with the national strategy, and its future potential is worth paying attention to.