Main points of investment:

Event: according to the company's semi-annual report, 2023H1 achieved operating income of 1.38 billion, an increase of 54.88% over the same period last year, and a net profit of 230 million, an increase of 358.07% over the same period last year. The net profit of non-return was 150 million, an increase of 204.63% over the same period last year. The revenue in the second quarter alone was 730 million, an increase of 72.85% over the same period last year, and the return net profit was 72.43 million, an increase of 420.38% over the same period last year, deducting 77.14 million of non-return net profit, an increase of 563.47% over the same period last year. The performance is basically in line with expectations.

The quantity and price of basic ophthalmopathy has risen, and consumer ophthalmopathy is based on performance. Sub-business segment, (1) cataract: benefiting from the release of backlog demand and the company's strategic adjustment, the growth rate in the first half of the year was remarkable, and 2023H1 achieved revenue of 270 million, an increase of 137.04% over the same period last year.

At the same time, the company actively promoted multi-functional intraocular lenses and high-end surgery to achieve a simultaneous increase in volume and price in the cataract plate, with a gross profit margin of 43.37% in the first half of the year, an increase in 8.06pct compared with the same period last year. (2) Comprehensive ophthalmopathy: 2023H1 achieved revenue of 200 million, an increase of 70.71% over the same period last year, and a gross profit margin of 19.77%, which increased 4.60pct over the same period last year. (3) refraction: after the company's transformation of refraction in 2018, the refractive project has become the project with the largest contribution to revenue. The Puri brand has good market awareness and competitiveness. Under the background of consumer recovery, the company's refractive 2023H1 achieved revenue of 710 million, an increase of 33.37% over the same period last year, and a gross profit margin of 53.00%, which increased 0.69pct over the same period last year. (4) Optometry: Shouguang is the key development direction of the company, and the company vigorously develops and improves the optometry business ability of the company through the establishment of relevant business departments, the introduction of talents, technology iteration and other omni-directional angles. At the same time, benefiting from the recovery in consumption, 2023H1 optics achieved revenue of 200 million, an increase of 52.87% over the same period last year, and a gross profit margin of 45.67%, an increase in 2.91pct over the same period last year.

The strategy of "national chaining + city integration" is advancing steadily. In the first half of the year, Shanghai Fengxian Puri and Hubei Puri opened, Dongguan **** completed the acquisition, as of June 30, 2023, the company has opened 27 eye hospitals, and a number of new hospitals are under preparation. The company's mature hospitals are highly profitable. The net interest rates of Urumqi Puri, Dongguan ****, Lanzhou Puri, Kunming Puri and Chongqing Puri in the first half of the year are 31%, 27%, 23%, 19% and 17%, respectively. The new courtyard, which is still in the development period, is also continuing to climb the slope, and will become an important driving force for the company's performance growth in the future.

The result of reducing cost and increasing efficiency is remarkable, and the profitability of the company is significantly improved. On the cost side, due to the continuous expansion of the business scale, the bargaining power of the purchasing side has increased, and the scale effect has gradually emerged. In the first half of the year, the company's gross profit margin was 45.38%, an increase in 1.5pct compared with the same period last year.

On the expense side, the company actively controlled the sales expense rate in the first half of the year, which was 15.8%, a decrease of 2.2pct compared with the same period last year. As a result, the company's non-parent net interest rate reached 10.78% in the first half of the year, an increase of 5.30pct over the same period last year, and the company's overall profitability improved significantly.

Maintain a "buy" rating. We maintain the company's profit forecast and expect to achieve 262 million, 294 million and 403 million net profit from 2023 to 2025, an increase of 1175.0%, 12.1% and 37.0% over the same period last year, corresponding to 62 times, 55 times and 40 times of PE. Taking into account the continued expansion of the company's business scale and steady improvement in profitability, we maintain a "buy" rating.

Risk hints: the risk of profit fluctuation caused by rapid expansion; the risk of medical malpractice; the risk of intensified competition in the industry.