Qisda Corp

TWSE:2352

Earnings Call Transcript 2021-Q4

[Operator]

Ladies and gentlemen, good afternoon. Welcome to Qisda Corporation 2021 Fourth Quarter Investor Conference. This meeting will be chaired by Qisda Corporation Chairman, Peter Chen; and co-chaired by CFO, Jasmin Hung. They are joined by 4 executives. GM of Information Technology and Commercial and Industrial Business Group, Mr. Joe Huang; GM of Medical Devices Business Group, Harry Yang; GM of Business Solutions Group, Michael Lee; GM of Networking and Communications Business Group, April Huang.

Today's conference will take an hour. The agenda is as follows. First of all, Jasmin, our CFO, will go over the fourth quarter financial results and business highlights. Chairman, Peter Chen, will then share with you our transformation results and business updates and outlook. Afterwards, Harry Yang, GM of the Medical Group will provide a business update on the medical business group. Then we will have our executives from other business groups to also provide an overview of their respective business. Then we will proceed with questions and answers. You may submit the questions online. We will collect the questions and answer them in the Q&A session.

Before we start with the presentation, please be reminded to pay some attention to the safe harbor notice. All forward-looking statements contain risks and uncertainties. Please spend some time to read the safe harbor notice on Slide #4. Thank you.

Now we would like to hand over to Jasmin, CFO.

[Jasmin Hung, executive]

Good afternoon. This is Jasmin. First of all, I would like to briefly introduce to you the group. Qisda is a global technology group with businesses spanning from ICT Medical Smart Business Solutions to Networking Communication. We were established in 1984, 38 years ago with the IPO ticker of 2352. We have 16 listed companies under the group's umbrella and manufacturing sites in Taiwan, China, Vietnam as well as 198 sales locations worldwide. We have locations for R&D in Taiwan and China. For revenue breakdown, Asia accounted for 46%; Americas, 31%; Europe, 21%; others, 2%. Revenue in 2021 was TWD 226 billion.

Next slide, our business groups. We have ICT, Medical, which accounts for 7% of the revenue, BSG for 13%; NCG, 12%; and others, 7%. The purple blocks including ICT, high value-added product portfolio, Medical, BSG and NCG. These are our high value-added businesses. Each of these businesses revenue totaled TWD 15 billion to TWD 30 billion reaching a meaningful scale. The ICT high-value-added product portfolios revenue was TWD 19.3 billion, Medical TWD 16.5 billion, BSG and NCG, both around TWD 28 billion. Each of the BGs has built a solid foundation in the industry that they operate in, respectively.

Q4 financial results. Full year revenue was TWD 226 billion, up by TWD 34.3 billion Y-o-Y, EPS, TWD 4.22, up by TWD 1.69 billion.

Revenue, OP income and net income attributable to Qisda and EPS all reached 10-year highs. Revenue was up by 18%, OP income up 11%. Net income attributable to Qisda up by 67% Y-o-Y. Gross margin was 14.4%, up by 0.4 percentage points, OP margin was 3.3%. ROE achieved 16.8%.

Q4 revenue grew 8% Y-o-Y. However, OP income and net income attributable to Qisda both decreased mainly due to rising material costs and expenses, with ICT and NCG being the hardest hit. ICT's revenue grew by 15%, as demand shifted to the commercial from the consumer segment, leading to a drop in gross margin due to changes in the product portfolio. Medical's revenue grew 29%, a new high, both quarterly and yearly and its profit contribution grew significantly. BSG's revenue grew by 36%, also highest on the quarterly and yearly basis. However, its profit contribution grew slightly due to rising material costs.

NCG's revenue decreased by 35%. Its profit contribution decreased due to shortages in materials and containers and port congestion. Two days ago at our Board of Director meetings, we passed the resolution to pay cash dividend of TWD 2.5 per share, representing a payout ratio of 59% and yield rate around 8%.

Comprehensive income. As said, in Q4, revenue increased by around 8% Y-o-Y and Q-o-Q. However, due to the unfavorable factors I mentioned earlier, OP income and net income decreased by TWD 200 million to TWD 300 million approximately. Net income attributable to Qisda went down by TWD 760 million Y-o-Y and down by TWD 400 million Q-o-Q. EPS was TWD 0.51 in Q4. For comprehensive income year-to-date, despite the pandemic shortages in shipping containers and materials, rising component costs, port jammed up, in 2021 our full year revenue reached a 10-year new high. Net sales came in at TWD 226 billion. Gross margin was 14.4%, up by 21% Y-o-Y. OP income was TWD 7.3 billion, up by TWD 748 million or 11% Y-o-Y. Thanks to asset vitalization and the change in AUO's shareholding accounting treatment, our net non-op income increased by TWD 4 billion. Net income attributable to Qisda was TWD 8.3 billion, up by TWD 3.3 billion Y-o-Y. EPS was TWD 4.22, up by TWD 1.69 year-on-year.

Revenue and OP income. Revenue and OP income were both highest in 10 years, both registering double-digit growth. Revenue was up by 18%. OP income was up by 11%. Due to rising material costs and expenses, OP income decreased slightly.

Balance sheet. The most worth noting is inventory. In the end of 2021, inventory was TWD 50.1 billion, up by TWD 2.1 billion Q-o-Q and up by TWD 15 billion Y-o-Y. The amount in Q3 2021 was TWD 47.9 billion. This change in the inventory amount was attributable to supply chain and freight issues, which have affected the entire industry, not just Qisda, with key component supply crunch, inventory levels, shipping time and in-transit inventories all went up, which was further complicated by material cost -- material price hikes resulting in increases in inventory amounts and inventory levels, but we expect the excess inventories will be lower gradually this year. There are bigger Y-o-Y changes in the amount of long-term investments and financial assets at fair value through other comprehensive income, down by TWD 12.2 billion and up by TWD 16.6 billion, respectively, which represents the change to the accounting treatment of our shareholding in AUO. Financial debt was down by TWD 4.8 billion or 9% Q-o-Q. Net value per share in the end of 2021 was TWD 20.08.

Key financial ratios. Again, what's most worth noting is inventory. Inventory turnover went up by 10 days Y-o-Y and decreased by 1 day Q-o-Q. The inventory turnover was 80 days. ROE was 16.8%.

Revenue breakdown by business. Our high value-added business, which consists of NCG, BSG, Medical, ICT, high value-added accounting for 10%, 13%, 7%, 9%, respectively. Together, they accounted for 39% of our revenue in Q4. Revenue breakdown by business yearly. High value-added business revenue share has reached 41%, proving that our transformation has produced positive results.

Given the expansion in the high value-added business portfolio, we have reached a sizable scale. The share of high value added business went from 16% in 2017 all the way to 41% in 2021, increasing by 25 percentage points over these years. We are going to kick off our next phase of transformation, aiming to improve the profit share of these high value-added businesses to more than 50% of our revenue. Meanwhile, with such gradual and steady increase in high value-added revenue share, our monitor business remains to be growing with increasing contribution to the high value-added business. Its share of the revenue went from 60% to 40%.

Now we will have Peter to have an update on our transformation results.

[Peter Chen, executive]

This is Peter. I would like to take some time to share with you our transformation results. Why do we want to have such a report to you? A few days ago, at the Board of Directors meeting, we passed a resolution to appoint a new President starting from April 1 this year. Joe Huang will be our new President of the Qisda Group.

Over the past 8 years, starting from 2014, when I became the President of Qisda, we set a goal to make our high value-added business to account for more than half of our revenue by 2022. As you have heard from Jasmin, we came very close to that in the end of 2021 with the high value-added business share at 41%. Our goal is to reach the 50% mark by 2022. We are quite confident that we will achieve the goal this year or even maybe surpass the 50% mark.

In 2013, the revenue was TWD 110 billion, and it has reached TWD 226 billion in 2021. So we nearly doubled the revenue growth, growing by TWD 110 billion. So we have made a big milestone. We have gone so far from 8 years ago, and we are coming very close to achieving the goal this year. Since you are -- we are well on the way to meet the target, we decided to get the succession plan rolling. So effective from April 1, Joe Huang will be our new President.

For the past 8 years, by working with the grand fleet of alliances, we effectively united the unsung champions in Taiwan's industry to compete in the global market. With robust and effective post-investment management, we've helped our partners to accelerate their top line and bottom line growth. So as you can see, our revenue and profit in 2021 reached new highs in 10 years. And I would also like to take this opportunity for all of your support.

The conclusion of 2022 will unveil our next phase of transformation. After the high value-added business, revenue share surpasses half of our revenue, we will seek to raise their profit share. So this will be our new strategy, our new vision. So that is why we decided to take this opportunity to share with you our transformation results made over the past 8 years.

From 2014 to 2017, we just started the high value-added business transformation. In the beginning, we focused on optimizing existing ICT business because the existing business is very important to us. It represented half of our revenue. We needed to improve its gross margin and also improve the margin profile of our high value-added product portfolios. And we have been seeing really good results in the past few years. What's more important is that we have been on a healthy transformation trajectory. We didn't let the existing business go back to live the revenue share of the high value-added business. However, we let the rising tide lift all boats. The case in point is monitor, whose shipments increased from 14 million to 20 million units per year, with increased focus on high-end products.

We only produce monitors that are larger than 23.8 inch. Smaller than that, we only work on niche applications. So we have been working on a lot of changes during 2014 to 2017. At the same time, new business have been started, including Medical and Business Solution Groups. And in the next phase, we also incepted the NCG Group. The group size did not expand quickly in the beginning but has been picking up the pace in recent years. And then in 2017 through 2021, we continued with optimizing the existing business. But at the same time, we worked on M&As to bring in more unsung champions in the industry to the group's umbrella. And so far, we have been building up the portfolio and are accelerating the growth.

I think I can provide you with some numbers. Last year, our revenue was up by TWD 34.3 billion, in 2020 up by TWD 22 billion. In 2019, it was up by TWD 14 billion. So from 2019 to 2021, the growth got faster and faster. And over that 3-year period, the growth was more than TWD 70 billion. In the meantime, with the grand fleet of alliances, our new business and high value-added business are also growing in tandem with the existing business expanding at the same time.

Our OP income has been on a rising trend from 2011 to 2021, as you can see from the chart on the left. And revenue and OP income are both on an upward trend. With the 2021 being the most significant, you can see that OP income has gone from more than TWD 40 billion to TWD 60 billion to more than TWD 70 billion. We have that to thank for to our grand fleet of alliances because we are able to initiate and accelerate the high value-added business transformation, while at the same time, help introduce our profit and revenue.

Next slide, you can see that our gross margin has been increasing. Between 2011 to 2013, it was between 8% to a little bit more than 10%. And since then, it has been growing and all the way to 14.4% in 2021. This reflected our vision, that is we hope that with high value added business transformation, we can make more contribution to revenue growth and at the same time, boosting our OP income profitability and EPS.

Similarly, our OP income margin has been increasing. While there are some dips during the pandemic, during which the supply chain disruptions and rising material costs have made it very difficult for some companies, and also us, to shoulder some of the rising costs. But through our active resources allocation, we have been able to increase our EPS. Starting from 2014, we've been steadily on a growth trend. It is especially very high last year at TWD 4.22. So what we did was that we made very smart disposal of some of our idle assets and minimize uncertainties from non businesses as well as trying to boost an increase in operating business profitability. Last year, our EPS, as a result, reached TWD 4.22, a new high in a decade. Because of the profit because of the stellar growth, we maintain a high payout ratio of nearly 60%. And we are distributing a cash dividend of TWD 2.5 based on our share price, TWD 31, this represents a year rate of nearly 8%. And we really have our investors to thank for it. We will continue to maintain this high payout ratio to reward our investors. I hope these results are satisfactory, and we will continue to work very hard.

Next slide is our major subsidiaries EPS and ROE performance. Many of the subsidiaries have reached a record high or a multiyear high in their EPS or ROE performance. I will not go through each and every one of them, but several companies I would like to highlight are Data Image, whose CPS is at a record high at 4.58. And TopView at 4.46 is at the highest level in 6 years.

In Hospital, usually we didn't talk much about Hospital business. But last year, our Hospital business has an ROE of 27%, which was the highest of the entire group. The lackluster performers are -- in terms of ROE are Simula. BenQ Medical Tech and Alpha Networks. There are some more information on the bottom of the slide. For Simula, rather for BenQ Medical Tech, it was hit very hard by the delayed purchases of medical equipment due to COVID. For Simula, it was going through business model transformation. After we made the investment, we accelerated the transformation in hopes of boosting its competitiveness.

I believe that improvements will start to materialize very soon. As for Alpha Networks, the industry, the networking and communication industry was hit relatively hard by the semiconductor supply shortages and supply chain disruptions. And we will seek to tackle these issues by improving the product mix and customer mix. So for these 3 companies, we are looking for a very quick improvements in their performance this year.

As you can see, of these subsidiaries, all of these subsidiaries, they are nearly in all making money with many of them improving, particularly strong in terms of profitability. They either have EPS more than TWD 3 or even more than TWD 5. We will continue to pursue strong performance, hoping that we can continue to yield better results. So these are some updates on our transformation results.

Now I would also like to talk about our business updates and outlook. We have set a clear vision in the past. And over the last 8 years, we have been committed to 4 winning strategies including existing business optimization, for which we've been performing really strong. And also, we have been working on expanding the Medical business, accelerating solution development and having strategic movements in 5G networking business. And these businesses have been providing higher contribution to our revenue.

Going forward, we hope that we can continue to accelerate the growth of these 3 value-added businesses, Medical, BSG and NCG. That is why we have been embarking on the next phase of transformation planning. We will continue to place a very sharp focus on the high value-added business. That is why we have appointed Joe Huang as the next President. With the leadership of Joe, we believe that the execution capability and the strategizing of Qisda will be better and more stronger.

As for me, myself, I will be able to spend more time on helping the new businesses to make profit because to do so, we need to spend more time strategizing. So by making this change, I will be able to allocate more time in strategizing and less on the operational side of the business in hopes of improving our profits and implementing more action that are profit oriented, so that we can meet the expectations of our investors.

Last year, EPS was TWD 4.22, representing a payout ratio of 60% and yield rate of nearly 8%. But truth to be told, such strong performance was not fully reflected on our share price. This also means that we need to work harder. Here, I would like to thank you for your support. And for the next phase of our transformation, we hope that we can have our share price better reflect our operating performance. Also, thank you for the long-term support for our value transformation.

Going forward, we will make adjustments and drive transformation at a faster pace. Our hope is to be able to maximize the momentum and even accelerate the growth. A lot of people may be interested in knowing whether we will continue to stick to our grand fleet of alliance strategy. Yes, we will. We will build upon our existing results and achievements and maximize the transformation results going forward. Currently, we are getting more requests from industry high performers, hoping to join us under the grand fleet of alliances. So we will not stop in our continuous pursuit for stellar performance, and we will only accelerate growth.

As for the Q1 outlook for February and January, we have already announced results. In January, revenue was up by TWD 3 billion Y-o-Y. And in February, it was up by TWD 3.3 billion. So the growth was already TWD 6.3 billion for the first 2 months of the year. This reflects that the growth momentum remains to be very strong, and we expect to see high growth in the first quarter.

As for profit, because Q1 is the traditionally slower season with the Chinese New Year holidays and also the supply chain issues and raw material price hikes, inventory issues have been increasing. And these issues have been highlighted in Q3 and Q4. And in Q1, there are still lingering implications.

Although COVID-19 is still with us, it is expected to have lesser impact on the market throughout the remainder of the year. However, there is currently military conflict with Russia and Ukraine. And also inflation is on the rise. Countries around the world may very well increase their interest rates, causing inflation to worsen. Every country is hoping that the Russia-Ukraine conflict could stop very soon. Otherwise, the impact on oil, agricultural produce, industrial raw materials, semiconductor, gas impact could be really, really deep. If the military conflict persists, inflation could worsen. These uncertainties have had some bearings over the past 2 years, but Taiwan has proven that we are able to counter these challenges.

As for this year, we are looking at a potential for sequential improvements, especially with regard to our profitability. I think that our revenue growth in 2022 will be very visible. While there may be many challenges in terms of profitability, we still believe that our profit will be able to increase. So this is my outlook for Q1 and the full year of 2022. Thank you.

Next, Harry Yang, GM of Medical Devices Business Group will have an overview of the Medical Business group.

[Harry Yang, executive]

Ladies and gentlemen, good afternoon. I am Harry Yang of the Medical Devices business group. I will take this opportunity to share with you an overview of our group. First of all, this slide presents our business road map in 4 groups. On the upper left, we have medical service, including the hospital, hearing aids and the 2 newly added arms, including medical management and pharmacies in preparation for our medical grand fleet. On the upper right, we have medical equipment and consumables, including surgical equipment, ultrasound scanner, medical display, intraoral scanner, dialyzer and dialysis machine. These are belonging to the dialysis industry, which is the fastest growing of our group. And on the right, we also have medical face masks and medical disinfectants which have posted strong growth last year. On the bottom left, we have medical robot hospital, smart surgery, smart dialysis and digital dentistry. Also on the bottom right, we have a aesthetic products, vision care, skin care, professional aesthetic equipment and wound care. These are 4 business aspects under the group.

Next, starting from 2008, we have been on a development trajectory. On the top of the slide are the companies or the subsidiaries under the group and on the bottom on the aspects that we set our foot into. So in 2008, we set up the BenQ Medical Center in Nanjing. In 2012, we launched [ fully ] into the medical imaging sector and in 2014 with BenQ dialysis, starting with dialyzer production. In 2017, we entered the hearing aid market. And in 2019, we invested in BenQ Biotech Shanghai, starting with dialyzer production and distribution. And in 2019, we built out a factory. And this year, we will start to make shipments with an expected shipment of 20 million units of dialysis machine per year. And in 2020, we started to launch into medical imaging distribution, disinfectant sectors and started to build distribution channels. We also made investments in Golden Spirit. And then in 2021, we are building the grand medical fleet of alliances invested in 4 more companies, including HeYue Life, Concord Medical, DIVA and Dataa. DIVA is a medical display company.

Next slide. This is a deeper look into our strategy. We are working to gather the hidden medical champions in Taiwan to leverage the core technologies and utilize the group resources to be a medical grand fleet that is user-centric. And we are pursuing growth based on a grand alliance and also, we are committed to user centricity and we want to pursue innovation.

Next slide. Our outlook and direction. On the left, these are our core capabilities, IoT, artificial intelligence, big data, 5G plus metaverse. With 5G, we have NCG, such as Alpha Networks are very important 5G vendor in the market. And also on the right are our 3 directions. We are working on smart health care, infection prevention and beauty and health sustainability. With smart healthcare, we focus on precision medicine, telemedicine and smart hospital solutions. For infection prevention, we are working on building smart pharmacies as well as providing personalized prevention products and services. And on the bottom, this is a very important aspect of our business, beauty and health sustainability.

We believe it is important for we to live happily and also to feel pretty. That is why we will be working on smart aesthetic services and also personalized health care. These are the 3 strategic directions that we are pursuing.

Next slide, our group presence around the world. On the upper right, there are 7 companies in China. And in Taiwan, there is a headquarters in Taipei and also 15 companies. Around the world, we have 5,000 and more employees working on the Medical group. And we have distribution channels in over 50 countries worldwide, mainly China and Southeast Asia. And also we have presence in Southeast Asia, Europe and Latin America.

I would also like to share with you our Q4 results. We had very high growth in Q4. The Medical BG was up by 38% in terms of revenue. Despite the negative impact of COVID-19, surgical market was down. However, at the same time, we had stable growth from dialysis and prevention of infection products. And in China, especially dialysis products posted double growth. As for the first quarter of 2022, we expect to see high growth as well. We are bringing into more companies, one is a medical management company while the other is a pharmacy.

Moreover, our traditional medical equipment business is recovering nicely as the pandemic eases and also our strategic deployment is coming to a close -- coming to an end in China in terms of our dialysis new investments. So we believe that the Q1 performance will be better than next year, and we are also expecting stellar growth for this year as a whole.

[Peter Chen, executive]

Thank you, Harry, from the Medical BG. We will also have the GMs of the other 3 business groups, who will also say a few words with regard to their 2022 business outlook. Joe Huang, please.

[Joe Huang, executive]

This is Joe Huang. I'm representing the ICT business between Q4 and Q1 this year. Commercial order stream has been above consumer order stream. While the number of materials in short supply has decreased, the supply crunch remains with [ par most and par IC ] seeing the steepest deficit. With just one component being short, we won't be able to deliver the set product. We're still seeing shipments between Q4 to Q1 this year.

While order momentum is quite strong, shipments are highly reliant on the availability of components. However, there are some bottlenecks that are dampening market sales because freight time is today around 10 to 12 weeks amid the port congestion in Europe and also in the U.S. Due to port congestions, stock shortages in the end market have materialized. Inventory levels are also low at hubs.

Currently, we are ramping up production to tackle the challenges. Recently, the Russia-Ukraine conflict has also disrupted rail transportation. In the past, we were able to ship a lot of containers through rail transportation. Today, we will have to resort to shipping again, which may suppress Q2 sales slightly. Thank you.

[Peter Chen, executive]

Now we would have April from NCG to also say a few words.

[April Huang, executive]

Good afternoon. This is April. Yesterday, Alpha Networks held its investor conference. I think some of you may have already known about the results, but I would still like to take this opportunity to provide an overview. If you have any questions, please feel free to ask me.

In 2021, Alpha Networks' revenue was already released, as we have already reported. The challenges from the supply chain disruptions were being felt, and we also had a multimedia IP camera project reach the end of life. This year, we will start mass production for the new project. That's the main cause of the revenue decline in the second half. But it also represents the growth prospects in 2022. In 2021, our revenue was negatively affected by the transition between the old and new projects and also by the COVID pandemic.

But the existing line, including router and new business, including 5G, both performed really strong. Last year, through optimizing our product mix, we delivered on our promises to investors improving our gross margin sequentially. In Q4, this gross margin hit the all year high at 18.9%. The full year margin was 16.5%, up by 0.9 percentage points Y-o-Y. In 2022, order momentum at the moment seems quite strong. And there has been some improvements in component supply tightness and port congestion. However, we have to be very cautious about uncertainties coming from geopolitical risks. But at NCG, we will be committed to our 4 winning strategies, including optimizing existing business, increasing new markets and new channels, expanding development in the new technologies such as millimeter wave and 5G as well as continuing with M&As. These will be our 4 winning strategies to ensure growth for 2022. More specifically, we will have some growth drivers, including -- we will have new product and new product -- projects coming up for the multimedia solutions.

Also, 5Gs RU, GU, CU will all grow. Last year, we already posted the 100% growth. And this year, we believe that the growth scale and [ reg ] will be even larger. And we hope that and we expect that 5G's revenue share will go from single digit to double digit of our revenue. Also today, we are finding strong potential in the low earth orbit satellite market, for which we have Alpha Networks and Hitron. Alpha Networks is part of a national project, providing a low earth orbit ground-level receiver, and Hitron is working with a U.S. vendor to provide the network communication and platform to provide the services needed by low earth orbit systems.

Also, we are increased -- we will be increasing the synergies among the group, especially between Alpha Networks and Hitron. Hitron's MSG distribution network will be adding new wireless products, including WiFi and 5G products from Alpha. In the past, we had very high market share. In the past, North America accounted a very high share of our revenue. And last year, we worked harder on boosting the revenue share of Latin American and European markets. In 2022, we'll seek to continue with the strategy. While we did not perform very well in 2021, we faced a lot of challenges. But we believe that there will be stellar growth this year.

[Peter Chen, executive]

Thank you, April. Now we will have Michael from BSG to say a few words.

[Michael Lee, executive]

Good afternoon, ladies and gentlemen, this is Michael from BSG. Last year, we mainly focused on infrastructure and cloud and on-prem integration businesses. In terms of infrastructure, we suffer from severe component supply tightness for the IPC business, and there were supply tightness across channels. However, companies under the BSG posted higher than previous year's net profit. As for 2022, we are seeing growth from infrastructure projects and also cloud and on-prem integration projects.

In Q4 2021, with the higher-than-expected revenue, profit and non-op income, we took the opportunity to make adjustments to the factory and office solutions. And we believe that starting from Q1, the growth will be even more significant than last year. For this year, we are seeing continued strength from the infrastructure aspect. We sense a chance to continue to improve our profit and revenue. As for on-prem and cloud integration projects, as we have said at SIEGE Investment Conference, we will be focusing on improving the revenue and profit for cloud and on-prem integration-related business.

[Peter Chen, executive]

Executives, thank you for providing your perspectives and also on our outlook for 2022.

Also, I would like to thank investors for posting questions. In the interest of time, I have already collected the questions, and I will address them myself.

[Michael Lee, executive]

The first question, since you have already appointed a new president, could you let us know why did you decide to do so? And going forward, how are you going to execute your strategy for bringing the high value-added business to account for more than half of our revenue? How long do you expect to -- before you can achieve that goal?

We have already set a 9-year vision. That is to make the high value-added business to account for more than half of our revenue by 2022.

Our revenue has gone from TWD 110 billion to TWD 226 billion last year, although high value-added business still not there at the 50% revenue share yet, but they could come very close to that goal by the end of this year. That is why we decided to make the announcement that starting from next year, we will be commencing the next phase, that is to bring the high value-added business to account for more than half of our profit when we conclude our 2022 phase. And the next step will be focusing on maximizing profit, so we'll be setting the goal to -- for the high value-added business to account for more than half of our profit. But as for by when, we will let you know next year. The appointment of the new President was just a warm up to that.

And in 2023, we will be unveiling the second phase time line. We will share more details then, including when do we expect the profit share to breach the 50% mark and what are the things that we will be working on. We will tell you more then. We have been working on a lot over the past 2 years. For example, we increased our shareholdings in several subsidiaries from 30-plus percent to more than 50%.

We have made announcements for these changes, stakeholding changes in previous announcements. Moreover, we will still have to accelerate our revenue rapidly. When we bring in new partners, we want to make sure that we can optimize resource allocation and integration, so that we can provide synergies. That is also one approach to improve revenue and profitability.

The goal that I gave to our business group is that when they bring in new grand alliance partners, they need to make sure that their annual revenue growth has to be at the 30% to 40% range. Many of our subsidiaries have been able to achieve that goal. Some companies even surpassed that goal. So when we have a high revenue from the subsidiary, the revenue can be translated to a bigger profit contribution. But at the same time, gross margin also needs to be higher. Through creating synergy across the group, we hope that we will be able to improve our core competitiveness, our RMB capabilities and our product values.

Therefore, we will be able to produce higher gross margins and to be able to [ short term ] the higher OpEx, resulting in a higher net profit. Of course, there are also other methods. For example, many of our subsidiaries are still not listed. As I have shown in the ROE and EPS page of our subsidiaries, you can see that many companies have not yet been publically listed, but they actually have been performing really well. A lot of them actually have had EPS of more than TWD 10. We hope that in the future, there will be opportunities for them to seek listings. So we have a good hand of cards. In the future, we hope that we can accelerate growth and to be able to play our cards strategically, so that we can hatch golden chickens from these golden eggs. In turn, we'll be able to reward our investors. Moreover, we can bring some of the profit back to Qisda. So again, we have a good hand of cards. We will play our cards strategically and smartly. By working with our grand fleet of partners, we hope that we can perform better and stronger.

There's also a question on our high value-added revenue. You mentioned that you will seek to bring the high value-added business to account for more than half of our profit in the second phase. Does that mean at the moment their profit share is still lower than the revenue share?

The answer is yes. As you know that when we merge a new company, we have to -- we can recognize their revenue 100%, but that is not the case for the profit because we still have to multiply the profit by our ownership percentage. Say if we own the company, 30%, 35% of its interest. When that company makes [ 100 ] NTD, we can only get 35 NTD back. And with most of our subsidiaries, we own about 50% to 70% of them. It cannot be more than 70% because for a listed company, when the stakeholding is more than 70%, that company has to be delisted. Moreover, it's worth noting that investment is not a silver bullet. You still have to look at the premium. The higher price that you pay for a company, the premium is higher, then the PPA is higher and you will have to amortize that purchase money over a period of 5 to 6 years. So you have to take the profit, multiply that by the ownership percentage and deduct that by the PPA, and that will get the money that you can bring back to the profit of the parent company. So you cannot just recognize the profit of subsidiaries at 100%. That is why we hope that we will be able to make -- to expand the base, expand the profit base so that we will be able to play our cards in the most intelligent and strategic way.

There is also a question on our hospital business.

Yes, indeed, our hospital business performed very well last year with an ROE of 27%, the highest of the group. This year, we are expecting still some very good performance from the hospital business as well. As I said last time, we are looking for the best timing and the best location to pursue listing of the hospital business, so as to maximize the values that we can get. The past 2 years with the COVID pandemic and unfavorable conditions in the political/economic environment, we do not find good timing. But we will find the most appropriate time for listing of the hospital business, so as to maximize the values. I think I can make a very bold projection. That is, I think in the next years, the most valuable business, the most profitable business of Qisda will be the hospital business and also the Medical business group. So please rest assured, we will do our best to boost the value and competitiveness of the hospital and Medical business. We are also working very hard to reward our investors and shareholders. We have spent so many years grooming the Medical business. So we will do our best to maintain its strength.

In the interest of time, we are not able to address all of the questions listed here. So please let us tell you that we will do our best to fulfill your questions in each of our quarterly conference. We are holding quarterly investor conference on it -- every year and every quarter, and we will have 1 face-to-face meeting once every year. Ultimately, we believe that we will need to demonstrate strong results to you -- to prove to you that we will do our best to deliver stellar results. And we will also reward our investors with strong stock dividends and impressive yield rate. Thank you all for your support.

[Operator]

Ladies and gentlemen, thank you for participating in the fourth quarter 2021 Investor Conference of Qisda Corporation. This concludes the conference. We will upload the audio and video file after the meeting. You may disconnect now.