Nomura: Aier’s third-quarter revenue growth rebounds as impairment and tax expenses weigh on profit

Where did third-quarter revenue growth come from?

In the third quarter of 2026, Aier’s revenue was 6.4 billion yuan, up 7.1% year on year. Growth exceeded the second quarter’s 1.2%, and revenue was slightly above Bloomberg consensus of 6.3 billion yuan. Nomura believes higher patient traffic and contributions from the Brazil acquisition may have been the main drivers.
For the first three quarters, revenue rose 4.9% year on year to 18.3 billion yuan, but net profit attributable to shareholders fell 26.2% to 2.3 billion yuan. Revenue growth has yet to translate into profit growth.

The third-quarter gross margin was 48.4%, down 2.0 percentage points year on year, mainly because medical equipment maintenance and repair costs were reclassified from administrative expenses to cost of revenue. Gross margin rose 4.4 percentage points from the second quarter.
A lower selling expense ratio drove a year-on-year improvement of 0.7 percentage points in the operating margin to 26.7%. Operating profit rose 9.9% year on year to 1.707 billion yuan, showing stronger profit performance at the operating level than in final net profit attributable to shareholders.

Higher other expenses and income tax expenses offset the improvement in operating profit. Nomura noted that the increase in other expenses came mainly from asset impairment losses; third-quarter income tax expense rose 62.8% year on year to 373 million yuan.
Third-quarter net profit attributable to shareholders was 941 million yuan, down 11.6% year on year and below Bloomberg consensus of 1.2 billion yuan. Nomura said revenue growth was in line with its assessment, but earnings were below expectations.

Nomura maintained its buy rating and target price of 13.13 yuan per share. The target is based on a discounted cash flow model, with an assumed weighted average cost of capital of 9.4% and a perpetual growth rate of 4.0%, both unchanged.
Downside risks to the target price identified by the bank include a further narrowing of the valuation premium, deterioration in the macroeconomic environment, medical incidents and goodwill impairment.