CICC: Maintains "outperform" rating on JXR (01951), with a target price of HKD 3.50.

CICC released a research report, maintaining JXR (01951) adjusted net profit forecast for 2026-2027 at 276-357 million yuan. The current price corresponds to a P/E ratio of 20.2/15.4 times for 2026-2027 (based on adjusted profit). It maintains an "outperform industry" rating and a target price of 3.50 Hong Kong dollars, which corresponds to a P/E ratio of 31.1/23.7 times for 2026-2027, representing a 50.9% upside potential from the latest closing price. CICC's main points are as follows: Performance in 2025 meets expectations The company announced its full-year 2025 performance: revenue of 2.649 billion yuan, adjusted net profit of 209 million yuan, in line with the bank's expectations. Significant improvement in operations in the second half of the year, with the domestic assisted reproduction market stabilizing In the second half of 2025, business volume and profitability showed a strong rebound, with the number of egg retrieval cycles increasing by 3.1% month-on-month and adjusted net profit increasing by 54.9% month-on-month. Influenced by the inclusion of assisted reproduction in the medical insurance policy, the penetration rate of three-generation test tube (PGT) technology (such as a 72.8% year-on-year increase in the three-generation cycle at the Chengdu branch) and the proportion of VIP services (increasing to 21.2%) have effectively alleviated the pressure of price reduction on conventional projects, driving the optimization of domestic business structure and the steady return of operations during the policy dividend period. Capacity release and policy dividends resonate, digital AI empowerment builds core technological barriers The company's domestic competitive advantage is strengthened. According to the company's performance meeting, after the new building of Shenzhen Zhongshan Obstetrics and Gynecology Hospital was officially put into operation, the cyclic capacity increased by about 4 times. From January to February 2026, the cumulative number of cycles compared with the same period last year increased by 18%, and the company expects to double its revenue within five years. In terms of the US business, the company introduced 7 experts in 2025, with management income increasing by 5.1%. With the implementation of the California commercial insurance law, driving a 38% increase in HRC cycles in January-February 2026. The company is actively promoting the restructuring of its US business to recoup funds, planning to expand the network of physicians to 40, and the scale effect is expected to be concentrated in 2026. On the technology side, the company's independently developed AI intelligent body covers the entire process of diagnosis and treatment, and through the transformation of "digital + AI", it improves clinical success rate and operational efficiency. Capital expenditure enters a contraction period, with sufficient cash flow supporting high shareholder returns In 2025, the company's operating cash flow reached 589 million yuan, and the comprehensive cost of debt decreased to 436 million yuan. The company expects capital expenditure in 2026 to shrink to below 50 million yuan, and the bank predicts that the company's own cash flow level is expected to significantly increase. The company continues to focus on shareholder returns and has approved a shareholder return plan for 2026-2028, intending to use 50%-80% of adjusted EBITDA for dividends and buybacks, with a planned buyback of 300 million yuan and dividend of 100 million yuan in 2026. Risk alerts: Industry demand growth lags expectations; intensified competition; policy changes; sudden medical events.