Qisda Corp
TWSE:2352
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Qisda Corp
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Welcome to Qisda Corporation 2022 First Quarter Investor Conference. This meeting will be chaired by our Chairman, Peter Chen; and Co-Chair by President, Joe Huang; and CFO, Jasmin Hung. They are joined by the GMs of our business groups, including GM of Information Technology Business Group, Daniel Hsueh; GM of Commercial and Industrial Business, Yuchin Lin; GM of Medical Devices Business Group, Harry Yang; GM of Business Solutions Group, Michael Lee; and GM of Networking and Communication Business Group, April Huang.
The agenda of today's meeting is as follows. Today's meeting, we will take about an hour. First of all, Jasmin, our CFO will go over our company profile and provide our Q1 financial results and financial highlights. Our Chairman, Peter Chen; and President, Joe Huang will then go over business updates and outlook. Afterwards, April Huang, GM of the NCG, we'll provide an update on the Network and Communication business group, followed by remarks from the GMs of other BGs. Afterwards, we will proceed with questions and answers. You may submit your questions online first. We will consolidate the questions and answer them in the Q&A session.
Before we start with the presentation, please be reminded that all forward-looking (sic) [ statements ] contain risks and uncertainties. Please also spend some time to read the safe harbor notice on Slide #4. Thank you. Now we will hand over to Jasmin Hung, our CFO, for the first quarter financial results and business highlights.
Good afternoon. I am Jasmin, CFO. First of all, I would like to provide an overview of Qisda Group. Qisda is a global technology group with businesses spanning from information and communication, medical smart business solutions and networking communications. We were established 38 years ago in 1984 and we are listed in Taiwan with the ticker of 2352, capital, TWD 19.7 billion. We have 201 companies under our umbrella. 16 of them are listed firms in Taiwan. We have a workforce of more than 30,000 around the world. We have manufacturing sites in Taiwan, China and Vietnam and 199 sales locations worldwide with major R&D sites in Taiwan and China.
Revenue breakdown by geography in the first quarter this year is Asia accounted for 42%; Americas, 33%; Europe, 23%; others, 2%. 2021 full year revenue was TWD 226 billion or USD 8.1 billion. For this year, we have won many recognitions as a responsible company and employer. In 2021, we were awarded by Forbes at the World's Best Employer 2021. And by HR Asia as the Best Company to Work For 2021 and Most Caring Companies 2021. Moreover, we continue to be committed to sustainable development. In 2021, we won Taiwan Corporate Sustainability Awards.
For our business groups, we have ICT. Under ICT, we provide DMS and branded services. For the products we have displays, gaming, high-end and general displays and projectors as well as commercial and industrial ICT products. In recent years, we have been working on developing high-value adding businesses under ICT, providing integration solutions and high-end video surveillance.
Under Medical, we have 2 hospitals in Mainland China, 1 in Nanjing and the other in Suzhou. For Equipment and Consumables, we have operating tables, surgical lights, ultrasound, hearing aids, dentistry consumables. For dialysis, we have end-to-end product and channel services. In Q1 this year, the grand fleet of alliances was further strengthened with the addition of a new member, which is a medical management consulting firm.
Under BSG, we provide software and hardware integrated end-to-end solutions specializing in several verticals, including Smart Hospital, factory, retail, energy, enterprise and campus. Under NCG, we provide ODM and branded as well as SI services. For products, we have LAN/MAN, wireless broadband, digital multimedia and enterprise mobile solutions.
Under others, we provide materials, including functional films and advanced battery materials for automotive applications. Our investees include AUO, which is the FVOCI item and Darfon, which is an equity method item. The items in purple boxes are our high-value added business. Together, they accounted for 40% of revenue. In 2020 to high-value added business revenue -- each of them has a revenue of TWD 15 billion to TWD 30 billion, reaching a meaningful scale.
Next slide, Q1 highlights. Our Q1 revenue grew by 20% Y-o-Y. Op income decreased by TWD 394 million and net income attributable to Qisda decreased by TWD 1.58 billion. The decrease in Op income was mainly attributable to rising material costs and expenses. ICT's revenue grew by 25% as demand shifted to the commercial from consumer segment. On the back of stronger commercial DMS and product monitored demand and weaker consumer demand, causing changes in the product mix, leading to the decrease in gross margin. However, ICT's profitability for other products is still on an upward trend.
The medical business revenue grew by 20%, reaching a highest in the same period, and its Op income also increased in tandem. The hospital business could have performed better was it not for the rising COVID cases in China. Our hospitals are based in Suzhou and Nanjing, we saw cases surging thus our hospital business were affected more significantly.
NCG's revenue decreased by 4%. Product mix optimization persisted for several quarters, leading to a 4 percentage point increase in gross margin and also an increase in Op income. We have been aggressively developing high-value added business with a hope to become more resilient to industry ups and downs. Medical BSG and NCG saw their Op income increasing. Our next step is to improve their profit contribution to our business as well as optimize ICT business' profitability.
For our Non-Op income, it decreased by TWD 1.17 billion, mainly due to TWD 800 million drop in income of the equity-method investments. In 2021, AUO's shareholding was measured using the equity method. This year, it is measured at fair value. This means we no longer recognize AUOs related to non-op income, but AUO's cash dividends will be accounted for as non-op income. Also, this year in Q1, we did not make disposal of investments in assets like last year, resulting in another TWD 0.36 billion drop.
The cash dividends and capital reduction from the financial investments will likely contribute for TWD 2.4 billion to our cash flow. On April 1, our Board of Director meeting decided to sell a 100% stake in BenQ (Hong Kong) Limited to meet long-term development needs and to place a sharper focus on high value-added business. The transaction value is expected to be a USD-denominated amount equivalent to RMB 2.753 billion and the estimated income from the disposal is approximately RMB 1.2 billion. This transaction is to be completed and the final transaction price will be publicly announced upon completion of the transaction.
Comprehensive income. In Q1, net sales came in at TWD 60.8 billion, up by TWD 9.9 billion or 20% Y-o-Y. Gross margin was 12.9%, down by 1.8 percentage points Y-o-Y, mainly due to a drop in monitor business. With the gross margins of other product lines still increasing, despite a 6 percentage point drop in Op expenses and a 1.8 percentage drop in gross margin, Op income margin was down by 1.2 percentage points Y-o-Y and Op income was TWD 390 million. Net non-op income was down by TWD 1.17 billion Y-o-Y. Net income attributable to Qisda was TWD 534 million, EPS TWD 0.27.
Next slide. First quarter revenue was TWD 60.9 billion up Y-o-Y, while Op income slid, we would accelerate our profit contribution of the high value-added business and expand the profitability of the ICT business. Balance sheet. Inventory was TWD 56.3 billion, up by TWD 6.2 billion Q-o-Q, mainly due to the increase in interest, inventory amid material shortages and longer transportation time. Plus higher raw material costs also led to inventory value to rise increasing by TWD 6.23 billion Q-o-Q. Financial assets at fair value through other comprehensive income noncurrent was down by TWD 2.3 billion Q-o-Q. This is a fair value item that does not affect our balance sheet or EPS as we measure our financial assets at fair value every quarter.
Equity was TWD 61 billion, down by TWD 5 billion Q-o-Q mainly because in Q1 we had a TWD 4.9 billion of cash dividends, which have been reclassified as an item of other payables under liabilities from equities, causing our liability ratio to increase by 4 percentage points Q-o-Q from 65% to 69%. On a Y-o-Y basis, long-term investments in FVOCI items will stand by TWD 12.5 billion and up by TWD 13.1 billion, respectively. Again, this reflects the shift from using the equity method to measuring the assets at fair values.
Key financial ratios, inventory turnover was 92 days up by 12 days Q-o-Q. Cash conversion cycle was up 16 days. With improving component supply tightness, we hope to reduce the turnover days and cash conversion cycle. Revenue breakdown by business in Q1, NCG accounted for 11% BSG, 13%; Medical, 7% ICT high-value-added business, 9%. Combined, these businesses accounted for 40% of our revenue in Q1, on par with Q4 ratios.
Revenue breakdown by business. High-value-added business revenue share was 40% in Q1. Obviously, our transformation results yielded really good results. For the next step, we would work to increase the profit contribution of our high value-added business to bring it to more than 50%. At the same time, our monitor revenue grew steadily, and its revenue share decreased from 60% to 40%.
Next, we will have Peter, our Chairman to say a few words.
Ladies and gentlemen, good afternoon. I'm Peter. First of all, this year, in Q1, our EPS was TWD 0.27, which was not ideal. I would like to say sorry to you. But if you have participated in our fourth quarter investor conference held in April, you would know that I had projected that Q1 will be the trough of profit for Qisda in 2022. And this -- starting from the beginning of this year, we have been feeling a bigger impact from COVID, which has a big challenge to our supply chains.
We have manufacturing sites in Suzhou. And in Q1, up until now, in May, Shanghai, Suzhou and Kunshan have been significantly affected by the pandemic. So our expenses increased as we rushed to meet customers [ albeit at the requests ]. We spent a lot of time and resources trying to work out challenges in the supply chain. And we had to manufacture products, obtain materials and deliver goods to our customers at much higher prices. So the impact has been significant. This has to do with where our manufacturing sites are located. Although we had made earlier attempts to expand our manufacturing sites to other regions of the world, we have been building factories in Hanoi, Vietnam and the production ratio of that site is increasing.
But still, we would need to accelerate how we contain our risk and mitigate risks as to strike the balance among our manufacturing bases. Q1's performance was lackluster. As I predicted Q1's revenue and profit would be at the lowest point in 2022, but we expect our performance to sequentially improve. Today, we maintain our outlook for this year. That is our profit and revenue will improve sequentially throughout the year. I hope you understand the reasons and we have already provided some information on this outlook in the beginning of April. Although this situation will likely continue in Q2 and COVID impact was bigger than expected in April and May.
Despite these challenges, we will do our best to overcome the challenges in hopes of delivering performance better than Q1 for Q2. So this was the outlook and situation for the first 2 quarters of the year. In the past 8 years, we have been working on high value-added transformation. We have brought into our grand fleet of alliances, many new members and partners, and we aggressively developed high value-added business. As mentioned last quarter, Qisda has been working for so many years. And today, we have a good hand of cards. Going forward, we will place more emphasis on profitability improvements and reflecting our revenue growth and profitability growth.
As Jasmin told you earlier, last month our Board of Directors decided to sell a 100% stake in BenQ (Hong Kong). This constitutes a disposal of a long-term investment. And then we have made public announcement. As [indiscernible] has already shared this information with you, I will not repeat here. The reason that we had this disposal is that we wish that we could pick up the pace in growth for our operations and to overcome the challenges for us to improve profitability going forward. We will do our best to allocate resources to initiatives that could contribute more to our revenue and our profit.
Here's more information for our Q1 and Q2 performance as well as our future directions. The next step for us is to continue on with our vision that we have set several years ago. As I mentioned last quarter, the next phase for Qisda is to have our high value-added business to account for half of our profit. And we believe the business' profit contribution will be even more visible going forward. On April 1, we have reshuffled our management team Joe Huang took over the helm as the new President. Later on, he will be joined by the GMs of our business groups to go over how they intend to improve the company's profit and revenue sequentially as well as provide more information on their respective businesses.
Now I would like to hand over to Joe, our President.
Ladies and gentlemen, good afternoon. I'm Joe Huang. This is the first time I am talking to you in the capacity as the President of Qisda. Qisda aims to further expand our business to be more focused and become more sophisticated in how we operate. Expansion wise, so far this year, we have been effectively expanding internally and externally. And at the same time, we have become more focused. This year, new progress has been made in the medical and green energy segments as we continue to expand.
First of all, we have set up 2 investment projects, BenQ Material and Concord jointly invested in [indiscernible]. This is the first investment project that we have seen progress made. Moreover, secondly, Ace Pillar invested in a Germany-based company, BlueWalker, which is a UPS product and service vendor. This also constitutes an investment in green energy. Part of our efforts to continue to expand our business. If there are any other projects that have been set up, we will provide more information to you.
Well although we want to be more focused and lean, we seek to allocate less resources to businesses no longer consistent with our vision. We decided to dispose of a lot long-term investments such as selling 100% stake in BenQ Hong Kong. Thirdly, we also work on organizational revamp. BenQ Guru and BenQ Energy have been consolidated into Ace Pillar and Sysage. So what we did was consolidating relevant products and services to improve the synergy and to pursue better profitability. We have also reshuffled our management. Daniel Hsueh has been named as the GM of ITG and his appointment was affected in the beginning of April. Daniel in the past has performed really strongly, leading his team to achieve great results. We will have Daniel say a few words.
Good afternoon. I'm Daniel. I'm going to be in charge of ITG. We would like to have your support going forward. Thank you.
Hi. We also have -- hi, this is Joe again. For CIG, we have appointed Yuchin Lin. Yuchin Lin was transferred from Alpha Networks to be the GM of CIG. Yuchin specializes in optoelectronics and infrastructure integration with decades of experience, we believe with his leadership, [indiscernible] is we will be able to do a better job at the integration of infrastructure up to electronics and related technologies. Moreover, Yuchin has profound knowledge and connections in Japan, which will likely benefit CIG's development going forward because CIG has a big customer base in Japan.
Hi. This is Yuchin. Good afternoon. Thank you for your support. I would like to have long-term from you. Thank you very much.
Now we will have April to say a few words and provide updates on NCG.
Good afternoon. I am April from NCG. I would like to provide some details on our priorities and our business updates. This slide contains the businesses of NCG. NCG is consisting of ODM-based Alpha Networks and brand-based Hitron with key focus on MSO channels as well as SI services-based IDT. So far, in 2022, our revenue was TWD 27.9 billion in 2021 with a workforce of more than 5,000. Now NCG has presence in Mainland China, Taiwan, Vietnam, Japan, the U.S. and the [indiscernible].
Next slide. If you want to talk about the vision of NCG, it will be full air and land coverage and intelligence. What is full air and land coverage? Air coverage refers to wireless communications, such as 4G, 5G, 6G and low earth orbit LEO satellites, communication networks based on signals transmitted through the air by radio waves. For land coverage, we are referring to wire coverage, which is up to fiber-based communication networks. For intelligence, this is what sets us apart, which lies in our edge computing capabilities. By intelligence, more specifically, I mean edge computing, edge algorithms. Besides communications -- besides providing product-related software and hardware services, we also provide edge computing value-added businesses and services. So this is our business footprint.
Next slide, NCG's 3 to 5 years winning strategy. Let's look at the upper left box first, optimizing current business; upper right, innovation-related business; lower left, expanding of the application fields. This refers to expand into new market channel and our market assets; lower right, M&A. This is an approach for us to expand our presence as a group.
Let me talk about optimization of the existing business first. In terms of our current business, we have switched that is offered by Alpha and wired broadband lines offered by Hitron. These 2 product lines are highly recognized by the industry. As we pursue growth, we want to make sure that our existing business is optimized. So in terms of existing business optimization, we would need to improve and raise the share of our high-end products. Moreover, we want to leverage existing channels to improve products and service delivery.
So first, it's about utilizing current business, second, it's about expanding our channels. Hitron has done a good job in expanding its existing channels. In these channels, if we can deploy more products, we will be able to accelerate growth. In fact, in terms of NCG business manufacturing products is much easier than expanding channels. So in our existing channels on this foundation, we want to provide better services, which would also constitute an important piece of the puzzle for optimization of the existing business. We will also need to deploy more high value-added business -- high value-added products to our channels to optimize the business of Alpha Networks.
For innovation, which revolve around product-related innovation, including software and hardware products. We will provide 5G end-to-end related product services. We continue to optimize and innovate in the 5G area. And in terms of innovation, we want to provide innovative software services and experience. When it comes to innovation, most people think about product innovation or hardware innovation. But for Hitron, it actually has a cloud service offerings. And for this service offering, it has 1 million connected users a year. So this is a big, very important piece of resource for us. We will continue to leverage these capabilities to provide innovative services and products.
And on the lower left, expanding application fields, the alliance between Hitron and Alpha Networks was intended to expand market assets. As said, Hitron provides very good channels. Currently, we have many different kinds of channels. But still we would need to continue to expand into new channels and new markets through various means. M&As is one of them. M&A is an important tactic for us to improve our strategic implementation in the other 3 areas that I just talked about. We will identify appropriate partners for us to work together and to are making our goals.
NCG is a high value-added business for Qisda. But in fact, our gross margin has much room to improve. As Jasmin mentioned, our gross margin has been on an upward trend. Last year, we had sequential growth in terms of gross margin. But I think we can be better. So besides working on implementing our winning strategies, we would work on improving our gross margins specifically about our innovative products. We would also based on our existing assets and results to push forward and to continue to optimize our offerings.
Now about gross margin improvements. Last year, we have seen sequential growth. However, last year, we had a slide in revenue. We expect, however, that we will return to growth this year. Last year, we attributed the slide in revenue to component supply [ Chinese ] and the fact that a consumer IP camera product reached end of life. While the new product will not reach mass production in Q2 this year. So between the gap -- between the 2 projects, there was a gap. We believe that going forward, NCG will be able to return to growth while also improving our profits. Thank you.
We will continue on with the remarks from GMs, starting from IBG and CIG. So Daniel and Yuchin, please say a few words.
IBG and CIG currently enjoys strong demand, especially demand from the consumer -- rather commercial segment. In terms of supply chains. However, we will need to see how situation will continue to improve. As transportation cycles increase, the U.S. has seen some reduction in the transportation time, but the reduction is not that visible in Europe. We will also need to pay close attention to inflation and rising interest rates and their implications.
Currently, lockdowns in Shanghai have affected our production. We hope that production will be recovered in May and June. Monitor orders are higher than expected with better outlook for profit. CIG experienced material shortages for projectors, but the situation has been improving. We expect that the revenue for CIG will be better than last year. So this is an overview for our business. Next we will have Harry to say a few words.
Good afternoon. Harry Yang from Medical BG. I would like to spend some time sharing with you our Medical business' performance in Q1 and Q2. In Q1, the Medical BG improved by 20% for revenue. Medical equipment saw a very impressive high growth at 50%, mainly benefiting from higher demand for anti-pandemic products such as masks, rapid test kits and disinfectant from Q1. Currently, we -- our supply has been short, and we believe the shortage will likely continue into the third quarter.
As for our dialysis business, we have been growing steadily. In China, the growing has been quite stable. And in Southeast Asia, we are expanding our footprint into Malaysia, Indonesia and other countries in the region with existing presence in Thailand and Indonesia. As for equipment and consumables. In China, equipment business was slightly impacted because of COVID, but consumable business is recovering in Latin America and in Southeast Asia. In Q1, we have 2 new members into our grand fleet of alliances. One is a pharmacy [indiscernible] pharmacy based in Central Taiwan and the other is a medical management consulting business Concord. This means we are expanding our business footprint into medical management.
We are also focusing on the dentistry management market, which has a market value of TWD 100 billion. And starting from June, we believe these new businesses will start to make contribution to our revenue and profit. For Q2, we believe the performance will be stronger than Q1. Anti-infection products currently see demand outstripping supply with a special stringent shortage for face masks. N95 masks are in high demand in hospitals. In Q2, we will continue to expand our medical business. We will also leverage M&As to complement our core business as well as push into forward-looking and frontier businesses. If we have any more progress we will share with you. Thank you. Next, we will have Michael BSG's GM to say a few words.
Good afternoon. This is Michael, GM of BSG. As we have shared with you in the past quarters, we have 2 major businesses. One is new infrastructures. And the other is cloud on-prem integration and digital transformation. These are both rigid demand. This both ensure rigid demand from now and the next 2 to 3 years, we believe the demand will be very strong. For this year, we will aim to improve the values of these businesses. Currently, we have 5 listed companies, Sysage, Hitron, IDTL, Ace, DFI and Aewin.
These companies have already posted their results. And at the moment, we believe they will likely have sequential growth throughout this year. We also have April to say a few words.
Good afternoon. Our revenue in Q1 was TWD 6.874 billion, up Q-o-Q, but down 4% Q-on-Q. Extending our strong momentum from last year, gross margin in Q1 was 18.9%, up by 4 percentage points Y-o-Y. Net profit margin was 3.93%, also up Y-o-Y. EPS TWD 0.25 versus TWD 0.21 a year ago. In Q2, we expect to post growth again, as we mentioned earlier, our Q2 sales is expected to increase Y-o-Y. Thank you.
Thank you, April. So these are the updates from our GMs. Now we will have Peter to say a few words.
Once again, thank you all for participating in today's investor conference. We have received many questions. And most of the questions revolve around cost increases and raw material supply tightness.
When do we expect component shortage to alleviate the ICs in short by BG? Also, does the shift in demand from consumer to commercial applications affect our gross margin?
I would like to address these questions myself. Over the past 2 years, we have seen demand shift into commercial segment with the work-from-home trend boosting module demand because PC and notebook computer users often require an extra bigger screen monitor for more comfort. So this has been a phenomenon as part of the working-from-home trend. As a result, demand increased significantly for monitors. However, customers have purchased the required monitors and the pandemic gradually came under control in the U.S. and Europe. As people resume their normal pace of life and resume working patterns, things have changed.
In the past few years, gaming has been an important pillar of home-use application demand with strong demand for PCs, local computers, smartphones, keyboards and mouses, which have higher margin profiles. So gaming-related demand was very strong. But starting from the second half of last year, we began to feel that gaming-related demand lowering significantly, resulting in big challenges to the market of gaming. This has also affected our product mix as Qisda has a high market share in gaming displays, the fluctuations in the application market has affected our profit.
Now about component supply tightness. As I said earlier, because Qisda's manufacturing sites are mainly concentrated in Suzhou and the vicinity of Suzhou, Shanghai, Suzhou and Kunshan supply chain disruptions in Q1 through May has still an impact on our operations. If you ask when the supply tightness will alleviate? Currently, it's very difficult to predict how the future holds as local government strategies vary, and we can rely on media reports to conduct predictions, although the pandemic has eased in Europe and the U.S. causing supply tightness to also alleviate, but we have to be mentally prepared for rising costs and to mature supply tightness for the second half, especially when production-wise, we are quite concentrated in a few sites. Recovery will take a longer time for us.
We hope that the pandemic will soon ease and component supply tightness will improve. Fortunately, we -- at Qisda, we have a big economy of scale with the support of our grand fleet of alliances. We stand a better chance to mitigate the impact effectively. Currently, our production lines are ramping up to provide more production. And our production line in Vietnam is also accelerating the qualification pace by customers to overcome the challenges in Taiwan. In [indiscernible], we have a big factory, which is fully loaded at the moment and is accelerating production too as part of our efforts to mitigate the negative impact. Currently, in terms of component supply shortages, semiconductor shortages remain quite tough. Also, because the demand for home use notebook PC and monitors is weakening digital applications and IC and CPU shortages have been easy. However, several segments are exceptions and are still in deep deficit. First of all, Analog IC is still in severe shortages.
So is power supplies because every device needs to have part supplies, resulting in the severe shortages for power supplies. Moreover, network communication-related ICs and automotive ICs are also in short. Today, the order placement to delivery time for an imported car is as long as a year. So what happens is that these ICs are still in severe shortage, analog IC power supplies and traditional process-related IC still experience severe shortages and would need to be resolved.
Here's another question. What is the timeline for Qisda to have the high value-added business to account for more than half of your profit?
Currently, we don't have a timeline yet. But we will next year. As we mentioned earlier, in 2014, we set the vision to have the high value-added business contribute to more than half of our revenue in 2022. In the past few quarters, we were at 40% to 42% with the high-value business revenue contribution. And this year, we stand a very good chance to reach that target. Early next year, we would update our vision, and we'll propose the timing for us to achieve the half of our profit target for our high value-added business. That is to say that by the end -- by the beginning of 2023, we will disclose more information to you for our goal for the high value-added business. Starting from April 1, we have a new management team. Joe has assumed the role of the present.
So I have already passed the baton to Joe, who will be working with the general managers of the business groups to work on improving the revenue and profit of their respective businesses. As for myself, I would focus more energy on accelerating the profitability of our high-value-added business. In terms of high value-added business, we have medical AIoT solutions and network and communication solutions. For these segments, we hope that the gross margin will be more than 20%. A few of the business segments have -- aren't there yet, aren't as high as 20% for the gross margin, but we have been making adjustments very rapidly in the past few years as April has shared with you in the past year. Alpha Networks and Hitron had their gross margin inching close 20%.
This is in line with our perspective when we decided to develop AIoT and network and communication business because we saw huge potential in these market segments such as the low earth orbit satellite market. Alpha and Hitron have made it into the low earth orbit satellite national team of Taiwan, which will likely help them to boost their profitability going forward. In terms of AIoT in the past, Taiwanese vendors did not pay much attention to software development. But in the era of AI, software is how you realize true values when it comes to AI, our software, you have to make money by brain power.
You don't need to think about or take into consideration bone costs, but brainpower is essential. That is why we have to place high emphasis on domain knowledge. For example, for a smart hospital to really optimize its values, it needs to combine ICT expertise so as to improve the efficiency and maximize added values. So you need to have software and hardware integrate these capacities to improve smart hospital capabilities. So Qisda has been combining the ICT expertise, which is a forte of Taiwan with our hospital business expertise and our hospital management expertise. In 2008, we have been investing in the hospital businesses. We were actually the very first company of all ICT firms in Taiwan to make such investments in the medical business. We hope that we will be able to combine our domain knowledge across the board to improve the gross margin.
Here's another question on our high value-added business. What is the gross margin of your high added business, especially for the hospital businesses?
For hospital business, its gross margin should be at least 30%, and we are expecting medical business to grow very fast this year. As I said earlier this month -rather earlier this year, we expect to see stellar growth from the medical business. In January, up until now, most of the members joining our grand fleet of alliances, our medical businesses. Just in the past few months, there are already 4 or 5 companies that are medical companies shown in us. In terms of our depth and the breadth in the medical business, we are confident that Qisda will be the strongest in the ICT industry in Taiwan, thereby contributing more to our revenue and profit.
I think we have reached the end of this conference. We have concluded -- now let's conclude today's investor conference. Thank you for your participation.
We don't have any other questions online, and we have already addressed all the questions. This concludes today's meeting. Thank you all for participating in Qisda Corporation 2020 First Quarter Investor Conference. We will upload the videos online after the meeting. You may all disconnect now. Thank you.
[Statements in English on this transcript were spoken by an interpreter present on the live call.]