Event: the company announces results for the third quarter of 2023. 2023Q1-3 achieved operating income of 3.103 billion, an increase of 22.98% over the same period last year, and a net profit of 557 million, an increase of 40.17% over the same period last year, deducting 572 million of non-return net profit, an increase of 32.07% over the same period last year. In the third quarter alone, the operating income was 1.109 billion, an increase of 17.44% over the same period last year, and the return net profit was 203 million, an increase of 25.65% over the same period last year. The non-return net profit was 210 million, an increase of 18.70% over the same period last year. The overall performance was in line with expectations.

The performance growth is steady, and the profitability continues to improve. In the third quarter, on the basis of a high base in the same period in 2022, it maintained a steady growth of 25.65% in net profit, due to the good growth of all kinds of ophthalmology diagnosis and treatment business and the steady improvement of the company's profitability on the revenue side. In the third quarter, the company's gross profit margin was 51.19%, up 2.15pct from the same period last year, and the net profit rate was 18.27%, up 1.19pct from the same period last year. The sales expense rate in the third quarter was 13.78%, an increase of 2.40pct over the same period last year. It is speculated that the refractive peak season and the operation of the new optometry center led to an increase in marketing investment.

Accelerate the two-wheel drive strategy of "endogenous growth + epitaxial mergers and acquisitions". On August 20 this year, the company announced that it had transferred a 33 per cent stake in Hefei Shining with 70 million of its own funds, with a total stake of 51 per cent after the completion of the deal. Hefei Shining started business in January 2020, and the hospital climbed the slope rapidly, with revenue of more than 100 million yuan in 2022, reaching 104.85 million yuan. 2023H1's unaudited operating income is 60.1 million, net profit is 19.63 million, net interest rate is 32.7%, the overall profit level is strong, and the statement will contribute to the performance growth of the company. On September 27, the company announced the establishment of the industrial fund Huaxia No. 1, which currently has a mature reserve of high-quality projects. According to the partnership agreement, it has acquired a 51% stake in Sichuan Yuanju Aidi Eye Hospital Management Co., Ltd., which controls Chengdu Aidi Eye Hospital, Enshi Huiyi Eye Hospital, Weishan Medical University Eye Hospital and Suining Fuxing Eye Hospital.

Among them, Chengdu Aidi Eye Hospital is Grade 3A Eye Hospital, and it is also a key specialty of ophthalmology in Chengdu, which is co-founded by Professor Hu Yuzhang, a famous ophthalmologist of West China Hospital and more than 10 well-known ophthalmologists of West China Hospital.

Maintain a "buy" rating. Taking into account the obvious improvement in the company's profitability in 2023 and the expected good growth of Q4 this year on the basis of last year's low base of Q4, we slightly raise our profit forecast. The company is expected to achieve a net profit of 711 million, 917 million, 1.208 billion (691 million, 915 million, 1.229 billion) from 2023 to 2025, an increase of 38.8%, 29.1% and 31.7% year-on-year. The corresponding PE from 2023 to 2025 is 48 times, 37 times and 28 times, respectively.

The company's diagnosis and treatment strength is outstanding, accelerate the extension expansion, the future performance will continue to maintain rapid growth, so we maintain the "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.