Report summary:

Huaxia Ophthalmology uses a national chain as its layout, adheres to the development strategy of “endogenous growth+epitaxial mergers and acquisitions”, and focuses on developing high-potential high-quality markets, and continues to expand from the coast to the inland. Huaxia Ophthalmology is about to enter the second round of rapid expansion. Expectations for business structure optimization are strong, and growth is quite clear.

From the coast to the inland, we are deeply involved in population agglomeration centers, have a core layout with high potential markets, and continue to “increase in volume”.

As of June 30, 2023, Huaxia Ophthalmology's listed company system operates 57 ophthalmology hospitals and 52 optometry centers; in the next 5 years, Huaxia Ophthalmology plans to build or acquire 120-150 hospitals and 200 optometry centers in 120 cities;

Under the general goal of a national chain, the company selects high-quality markets with remarkable potential for development to carry out a deep-seated layout, and the development prospects of its hospitals are quite clear;

The group takes Lu, Jiangsu, Zhejiang, Fujian and Guangdong as the vanguard, explores cryptographic layout using coastal regions as a starting point, and continues to deepen its brand influence.

Consumer ophthalmology and basic eye diseases go hand in hand, high-end projects continue to develop, and “price increases” steadily. Judging from the Group's overall business structure, Huaxia Ophthalmology's basic ophthalmology project is strong, and its brand power as an ophthalmology specialist hospital chain continues to rise; judging from the business profitability, the company's various Asian specialties have shown first-tier gross margin levels and comprehensive capabilities in the industry.

The perfect medical education and research system extended by the strong strength of the Xiamen Ophthalmology Center is the central pillar of the Group's long-term development.

The Xiamen Ophthalmology Center is the Group's ophthalmology diagnosis and treatment technology center. It is “academically guided, technology-centered, and patient-centered” to provide strong clinical guidance and technical support for the entire group;

The Xiamen Ophthalmology Center is an ophthalmology specialist hospital with the highest comprehensive strength in China. The group uses it as its core to build a medical education and research system. External talent drainage and internal talent training go hand in hand to continue to strengthen the Group's talent pool.

Profit forecasting and investment suggestions: The company uses a national chain as its layout, adheres to the “endogenous growth+epitaxial mergers and acquisitions” development strategy, and emphasizes collaborative development of medical education and research. Deepening hospital layout and business structure optimization are expected to achieve a “sharp rise in volume and price”. Considering the 23Q4 situation in the industry, we expect the company's revenue for 2023-2025 to be 41.01/51.23/6.324 billion yuan (previous value was 40.89/50.32/6.167 billion yuan), and net profit to mother of 6.99/8.93/11.32 billion yuan (previous value was 7.08/8.95/1,122 billion yuan), corresponding to 2023-2025 PE of 34X/26X/21X. We give the company a “buy” rating.

Risk warning: policy risks, single-court growth falling short of expectations, industry competition increasing risks, etc.