Mingyue Lenses is a leading domestic lens manufacturer with advanced technology and leading sales in the country. Established in 2002, the company is a leading comprehensive eyewear lens manufacturer in China. With the lens business as the core, the industrial chain layout is perfect, and after more than 20 years of development, it has become the absolute leader in domestic lenses. The company's actual controller holds 61.2% of the shares, and the employee shareholding platform accounts for 2.9%. The core management team has rich experience and strong team stability, enabling the company's long-term development. The capital raised by the company's IPO is mainly used for capacity expansion, technology upgrading, R&D center construction, and marketing network construction.

Conventional lens business (underestimated invisible growth gripper): strategic transformation of the middle to high-end blue ocean price range, large product volume, product structure improvement, and product, channel and brand strength to establish long-term development barriers. Since 2018, strategic adjustments have been made to focus on the middle and high-end markets, product structure optimization, and misplaced competition with foreign investors. In the context of consumer recognition of domestic lens brands gradually increasing, focusing on lens functionality while also considering cost performance, Mingyue Lenses can better handle the functional needs of white brand users plus customer demand returning from foreign brands after considering cost performance. In 23Q3, the growth rate of conventional lens revenue was over 20% year-on-year, and the growth rate was impressive. Among conventional lenses, the PMC, 1.71, and anti-blue light series, which have excellent product strength and higher customer unit prices, are being released more rapidly, driving the continuous improvement of the conventional lens product structure. As of 23Q3, the three major single products accounted for more than half of conventional lens revenue. Brilliant sales of large single products have led to a steady increase in the company's revenue and profit, and also showed the continuous improvement of the “Mingyue” brand power. The company continues to invest in R&D to ensure long-term technological leadership, has a rich reserve of related new products, and will continue to maintain the market leadership of products by launching them one after another when they actually mature. The company's offline retail channel layout has been extensive and deepened. Since 23, it has increased the development of leading national and local customers, and the marginal channel optimization space can be expected; the company laid out multi-channel publicity earlier, and the brand image of high-quality domestic lenses is deeply rooted in the hearts of the people. Looking at the medium to long term, the company is expected to gradually upgrade from “the bright moon of manufacturing” to “the bright moon of the brand” and the “bright moon of technology”, and the conventional lens business is in a steady revenue and profit growth channel.

Myopia prevention and control business (booming second growth curve): The youth control circuit is very prosperous, easy control has a strong comparative advantage, and the second growth curve can be expected in the future. The myopia situation among young people in China is serious, and the demand for myopia prevention and control among young people is broad. Compared with other myopia prevention and control methods such as low-concentration atropine and corneal shaping lenses, defocus lenses can achieve relatively good prevention and control effects while also having comparative advantages such as easy to wear, wide sales channels, and high cost performance. We are optimistic about the room for future penetration rate improvement. According to the S curve theory, the penetration rate of defocal lenses is still on the left side of the rapid growth point (10%), and future growth is expected. Compared with foreign investment competition, Mingyue defocus lens products have excellent myopia prevention and control effects, a perfect product matrix, are more cost-effective, have higher product compliance, faster delivery speed, remarkable differentiation advantages, and can easily control the volume of series products quickly. The company actively invests resources in product promotion, consumer education and terminal empowerment to easily control the steady increase in brand potential. In the medium to long term, the Youth Control Circuit is booming, and the Easy Control series has a significant competitive advantage. Considering that the company is developing leading retail channel customers and actively complementing the medical channel layout based on the layout of tens of thousands of offline terminal stores, the Easy Control series products are expected to continue to be rapidly released. According to estimates, we expect the industry to develop into the medium term (~2030). Under the assumption that Mingyue Lenses can easily control the market share of 14%, the sales volume of defocus lens products with a penetration rate of 10%/20%/30% among myopic young people was 4.8.7/13.0 100 million yuan (out factory caliber), there is still a lot of room for growth compared to '22.

Investment advice: From a global perspective, the world's leading eyewear industry leader Yishilu Luxundeca has been successfully launched overseas. The lens segment also includes world-renowned brands such as Yishilu and Zeiss. The lens industry has a long and snowy landscape, and the future development of the industry can be expected. Considering that the company is a leader in domestic lenses, the revenue and profit of the conventional lens business is expected to grow steadily and become a hidden growth gripper, actively lay out a myopia prevention and control circuit, build a second growth curve with a high growth rate, and have strong scarcity. We expect the company's net profit to be 165 million yuan, 203 million yuan, and 285 million yuan in 2023-2025. The current stock price corresponds to PE of 51x, 42x, and 30x, maintaining the “recommended” rating.

Risk warning: Raw material price fluctuations and myopia prevent and control the risk of increased market competition.