Zheshang: The hospital sector is significantly influenced by themes, with new endogenous growth being cultivated.

Zheshang released a research report stating that looking ahead to the second half of 2026, the overall external environment for the hospital sector may trend toward stability, and marginal changes in medical insurance policies and changes in the consumption environment need to be tracked. At the same time, companies are internally forming new growth poles by deploying new businesses and new regions. The bank recommends paying attention to companies deploying new businesses and new regions or targets with high marginal change elasticity. Zheshang's main views are as follows: Sector review: Market performance lacks fundamental support and is significantly influenced by themes 2026 H1 review: At the beginning of 2026, driven by consumer recovery sentiment and coupled with a clear rebound in refractive surgery business within the ophthalmic hospital sector, the hospital (Shenwan) index rebounded slightly. Subsequently, the recovery trend in summer consumer-related businesses did not continue. During the same period, serious medical services were constrained by the slowdown in the growth rate of basic medical insurance revenue and expenditure, and the central growth rate on the revenue side has not yet opened up, with external constraints still requiring observation. 2026H1 share price review: Overall share prices in the hospital sector were higher earlier and lower later. The reasons for the relatively large gains in the hospital sector in 1Q26 were, on the one hand, the boost from consumer recovery sentiment, and on the other hand, the boost from AI healthcare and brain-computer interface themes. Subsequently, they retreated due to a lack of fundamental support. Marginal changes and cycle judgment for 2026 H1: The external environment is trending toward stability, and new endogenous growth is being cultivated External environment: For serious medical services, basic medical insurance expenditure is an external variable for business growth, and its steady-state growth rate still needs observation. For consumer medical services, average customer spending in some businesses may have stabilized and rebounded due to improvement in the industry landscape, but the specific growth rate of consumer demand is constrained by the broader consumption environment. Endogenous growth: For both serious medical services and consumer medical services, the bank notes that the number of newly built stores and external mergers and acquisitions is still relatively small. New businesses and overseas businesses are still in the cultivation stage, and their future incremental CKH HOLDINGS revenue contribution still needs observation. 2026 H1 hospital sector summary Revenue side bottoming out: Among listed companies in consumer medical services and serious medical services, revenue year-on-year growth rates diverged in 26H1. Companies with mergers and acquisitions and newly built stores had faster revenue growth, while companies relying purely on endogenous growth were still in the stage of bottoming out on revenue growth. Gross margin divergence: There was divergence between listed companies in consumer medical services and serious medical services. Consumer medical services companies may have seen gross margin improvement due to stabilization and rebound in average customer spending, while gross margins of listed companies in serious medical services remained generally stable. Net margin moved in sync: Apart from Aier Eye Hospital Group's self-inspection and tax supplementation and Topchoice Medical's consolidation of ophthalmic hospitals, net margins of other listed companies in consumer medical services improved in sync, while net margins of listed companies in serious medical services remained stable. Risk warnings: The risk that industry consolidation falls short of expectations, the risk that external environment improvement falls short of expectations, and the risk of policy uncertainty.