Introduction to this report:

The company's eye disease diagnosis and treatment go hand in hand with consumer ophthalmology, and the optimization of the business structure has led to an increase in profit levels. Driven by endogenous growth and external mergers and acquisitions, the national chain layout is expected to accelerate. It was covered for the first time, and a rating of increase in holdings was given.

Key points of investment:

For the first time, it has been covered by an increase in holdings rating. The company's comprehensive ophthalmology and consumer ophthalmology go hand in hand. Driven by endogenous growth and epitaxial mergers and acquisitions, the nationwide chain expansion is progressing steadily, and it is expected that rapid growth will continue. It is predicted that the company's EPS from 2023 to 2025 will be 0.88/1.14/1.48 yuan. Referring to comparable company valuations, the 2024 PEG 1.5X is given, and the target price is 51.30 yuan. First coverage, and an increase in holdings rating is given.

The advantages of basic eye diseases are consolidated, and consumer health care is expected to improve. The company brings together famous ophthalmologists represented by Professor Li Xiaoxin and Professor Zhao Kanxing, Academicians of the International Academy of Ophthalmology Sciences, to continue to build a highland of talent training and diagnosis and treatment technology. Comprehensive eye diseases are at a high level. Diagnosis and treatment of eye diseases such as cataracts and fundus diseases is an advantageous project. Rapid recovery is just needed after the epidemic, and steady growth is expected to continue in the future. The growth rate of consumer medicine increased. The refractive and optometry business accounted for 45% in 2022. There is still plenty of room for improvement. The company is increasing its promotion efforts. In the future, as consumption potential is unleashed, the growth rate is expected to gradually pick up with the application of new equipment/technology. With the optimization of the business structure, the proportion of middle and high-end projects continues to increase, and the scale effect is showing, and profitability is expected to further improve.

Driven by endogenous and epitaxial two-wheel drives, the national chain layout is advancing at an accelerated pace. As of 2023H1, 57 eye hospitals and 52 optometry centers have been opened in 49 cities across the country. The Xiamen Ophthalmology Center, a benchmark hospital, has resumed steady growth, and early training hospitals have gradually matured, and its contribution to performance is expected to continue to improve. The company is actively preparing a number of industrial funds to promote the expansion of the national chain. It plans to build and acquire 120-150 hospitals over the next 5 years, and plans to land 20-30 hospitals every year. It also relies on hospitals to promote the construction of 200 optometry centers in an orderly manner to improve the ophthalmology medical service network. As of the end of September 2023, more than 20 ophthalmology hospitals have been built and acquired, laying the foundation for steady and continuous growth in future performance.

Catalysts: Industrial fund implementation; new construction and mergers and acquisitions to promote hospital expansion Risk warning: Hospital expansion and profit decline are not as good as expected; risk of increased industry market competition