occurrences

On March 28, 2023, the company announced that it achieved operating income of 999 million yuan in 2022, -0.78% year on year, and achieved net profit of 188 million yuan, +16.21% year on year, adjusted net profit of 186 million yuan, +0.15% year on year; profit per share of 0.27 yuan per share.

Comment:

Performance is under slight pressure; it is expected that the company's revenue will remain flat and profits will increase year-on-year in 2022 after the external environment was normal. Mainly due to the continued spread of the epidemic in many places last year, compounded by the impact of the peak of COVID-19 infections after control was liberalized, the company's hospitals in Inner Mongolia, Zhejiang and other places have all been suspended for various periods of time and the number of patients declined.

Splitting the revenue structure, the company's revenue from consumer ophthalmology services in 2022 was 543 million yuan (+4.96%), and revenue from basic ophthalmology services was 447 million yuan (-6.78%). From the perspective of profitability, the company's overall gross margin was 43.90% (-1.10pct year over year); the period expense ratio was 23.76%, compared to the previous year (+0.21pct); of these, the sales expenses ratio was 6.18% and the management expenses ratio was 16.33%; net operating cash flow was 273 million yuan, +9.63% year on year.

Looking at the demand side, the number of outpatient visits in the company's hospitals in 2022 was 944,500 (887,300 in the same period last year), and the number of inpatient visits was 44,600 (46,000 in the same period last year). Demand for elective medical services was affected by epidemic control, etc., and the number of visits declined year-on-year.

In 2022, the number of patients treated at the company's optometry center was 102,000 (119,000 in the same period last year). We look forward to the gradual recovery of patients treated after epidemic control was liberalized.

The hospital's asset quality is excellent. Looking forward to the increase in performance brought about by the release of demand after the pandemic, the company operated 24 ophthalmology hospitals and 26 optometry centers during the reporting period, and successfully completed the acquisition of Tangshan Jidong Hospital, Yutian Jidong Hospital, Luannan Jidong Hospital and Luanzhou Jidong Hospital in November 2022. The company's mature hospitals are well known. In the context of the gradual elimination of the impact of the epidemic, Climber Hospital is expected to climb rapidly. The newly acquired hospitals have excellent asset quality and are expected to continue to increase revenue and profits.

Investment advice: Maintaining a “buy” rating

The company is a regional leader in the private ophthalmology industry that is deeply involved in Inner Mongolia and has spread across the country. The booming demand in the ophthalmology medical service market and the shortage of high-quality medical resources have provided the company with broad development space. In the context of the liberalization of epidemic control, the company is expected to meet the rapidly recovering demand for ophthalmology care. The clustered operation of its hospitals will further improve the company's operating efficiency, and performance is expected to grow rapidly. We expect the company to achieve revenue of 1211/1438/1685 million yuan from 2023 to 2025, +22%/19%/17% year on year; achieve net profit of 231/277/327 million yuan, +23%/20%/18% year on year; and maintain the “buy” rating.

Risk warning

Risk of policy change; risk of retention of physicians and employees; risk of regional operations; risk of increased industry competition.