Recommended logic: 1) The company has set up 27 ophthalmology specialist hospitals and 3 ophthalmology clinics, covering municipalities directly under the Central Government and major provincial capitals across the country. The new hospital is expected to continue to expand in 2024, and the new hospital continues to inject vitality into the company's performance growth; 2) The company's business structure is continuously optimized, and the revenue share of high-margin projects with non-medical insurance consumption attributes such as refraction and optometry continues to rise to 65.4%, actively promoting high-end cataract surgery to withstand the risk of profit margin reduction brought about by medical insurance fees; 3) Consumption upgrades and myopia prevalence rates increase in China's refraction and optometry market Capacity expansion, expected to refract until 2025 The surgical market will reach 72.6 billion yuan, and the company's main business market space is large.

The provincial capital expanded the route “horse racing circle” and built a brand with the support of high-quality physicians' resources. The company has initially established a map through the expansion of provincial capitals. The net interest rate of mature hospitals is about 20%, and some hospitals are over 25%, close to the leading level of the industry. The company's merger and acquisition funds are expected to be launched in the near future to help the expansion of new hospitals, and the company's performance growth has sufficient reserves; in 2021, the proportion of medical staff with a master's degree or above reached 6.4%, which is higher than most companies in the industry. 43.5% of practicing physicians are called chief physicians. High-quality physicians' resources are conducive to ensuring the quality of medical services and building the company's brand.

Optimizing the business structure increases profit margins and enhances resistance to health insurance fee control risks. Under the medical insurance fee control trend, the company increased the revenue share of consumer attribute projects to reduce the risk of reduced gross margin. The revenue share of refractive and optometry projects of 2023H1 increased to 65.4%, and the business structure was further optimized. In addition, the 2023H1 company is investing in the cataract business, inviting famous doctors to further improve the quality of medical services, actively promoting multi-functional intraocular lenses and high-end surgical methods, and improving the profit margin of the cataract business while meeting patients' high-quality visual quality requirements while improving the profit margin of the cataract business.

The main project market continues to expand, and the prospects for endogenous growth are promising. Consumption upgrades and the increase in the prevalence of myopia have promoted the expansion of the optical correction and refractive surgery market in China. It is estimated that the market size of the refractive surgery market will reach 72.6 billion yuan by 2025, and the company's refractive and optometry programs have broad prospects for development; the company is increasing its research in optometry programs, and the share of revenue is expected to increase further.

Profit forecasts and investment advice. The 2023-2025 EPS is expected to be 2.13 yuan, 2.47 yuan, and 3.08 yuan, respectively. The average PE for the industry in 2024 was 34 times. Considering that the company is in a period of rapid growth and there is plenty of room for improvement in net interest rates, the company was given 52 times PE in 2024, and the company's PEG 1 times lower than the industry average. The corresponding stock price was 121.33 yuan (calculated based on net profit from non-return), covering the “buy” rating for the first time.

Risk warning: policy risk, business failure risk, medical accident risk, etc.