Key points of investment

Incident: On the evening of September 4, 2023, Puri Ophthalmology announced that it plans to repurchase 32.95 to 395,400 public shares (accounting for 0.22% to 0.26% of the company's total share capital); the repurchase price shall not exceed 151.74 yuan/share; the repurchase period shall not exceed 6 months; and within 36 months after the share repurchase is completed, all will be used to implement the shareholding plan or equity incentives.

It was the first repurchase after listing, and equity incentives are progressing clearly. This is the first share repurchase since the company went public. Based on the number of repurchases and the upper price limit, the estimated repurchase amount is 50 to 60 million yuan.

Shares with limited sales conditions before the repurchase accounted for 52.56% of the total share capital, and are expected to increase to 52.91% to 52.92% after the repurchase. Through this repurchase plan, the company sends a positive signal to the market. In the future, it is expected that the governance structure will be optimized through equity incentives to ensure the certainty of long-term strategy implementation.

High premium repurchases show confidence in long-term development. The maximum repurchase price of 151.74 yuan is a significant premium of 36.58% over the same day's closing price of 111.10 yuan, demonstrating management's confidence in long-term development and the company's value positioning, which is conducive to mitigating short-term stock price fluctuations caused by market sentiment.

Endogenous growth is impressive, epitaxial expansion is steady, and profitability continues to improve. On the business side, the revenue growth rate of the company's four major businesses in 2023H1 all exceeded 30%, and refract/optometry/cataract/underlying eye disease increased by 33.37%/52.87%/137.04%/70.71%, respectively; during the same period, the company's overall net interest rate was 17.05%, an increase of 11.32 percentage points over the previous year. Looking at hospitals, as of 2023H1, 27 hospitals have been opened (Hubei Second Hospital and Shanghai Second Hospital opened in the first half of the year), and it is expected that 1 to 2 new hospitals will still open in the second half of the year. We believe that in the future, as the company continues to develop its cataract business, its hospitals gradually reverse losses, and steadily implement equity incentives, the company is expected to continue to grow at a high level.

Profit forecast and investment rating: Considering that the company's new hospital continues to climb and reverse losses, and the company's announcement of a repurchase plan conveys management confidence, we adjusted the company's net profit from 2023-2024 to 311 million yuan (including about 90 million yuan in investment income) /313 million yuan, 412 million yuan in 2025. The PE corresponding to the current market value is 54X/54X/41X, maintaining the “buy” rating.

Risk warning: Hospital expansion or integration falls short of expectations, hospital profit growth falls short of expectations, risk of medical accidents.