Incident: On March 26, 2024, the company announced that in 2023, it achieved operating income of 1,370 million yuan, an increase of 38.33%; realized net profit of 229 million yuan, an increase of 21.92%; adjusted net profit of 223 million yuan, an increase of 19.84%; and gross margin of 45.35%, an increase of 1.45 pcts year on year. The increase in performance was mainly due to an improvement in the post-pandemic economic environment and a recovery in demand for ophthalmology services.
Both basic ophthalmology and consumer ophthalmology are growing. In 2023, the company's consumer ophthalmology and basic ophthalmology achieved revenue of 709 million yuan and 654 million yuan respectively, up 30.64% and 46.26% year-on-year respectively, accounting for 51.79% and 47.76% of revenue, respectively, and gross margins of 49.14% and 41.55%, respectively. The growth rate of basic ophthalmology in 2023 was higher than that of consumer ophthalmology, mainly due to the pandemic's backlog and release of demand for eye diseases such as cataracts.
The sales expense ratio has increased, and the management expense ratio has decreased slightly. In 2023, the company's sales expense ratio was 7.67%, up 1.48pct year-on-year. The management expense ratio was 16.24%, down 0.12pct year over year. Sales expenses have increased dramatically, mainly due to increased marketing expenses for new construction and acquisition of hospitals. In 2023, the number of outpatient visits in the company's hospitals was 1.1287 million, up 19.50% year on year; the number of hospitalizations was 67,300, up 50.87% year on year; the number of visits by the company's optometry center customers was 120,200, up 17.88% year on year.
The expansion plan progressed steadily, with the acquisition of 7 hospitals. In 2023, the company acquired 7 hospitals located in Inner Mongolia, Ningxia, etc., extending the company's footprint in North China and gradually interacting with the ophthalmology markets in Mengdong, Mengxi, Hebei, Shanxi and Ningxia. Currently, the company operates 31 ophthalmology hospitals and 29 optometry centers across seven provinces and autonomous regions in China. Two new hospitals, Zhoushan and Zhangjiakou, were added to the network of ophthalmology hospitals and optometry centers, which commenced operations in February and July 2023, respectively.
Investment advice: Recovery after the epidemic is obvious. The company's revenue is expected to be 16.13, 19.81, and 2,378 billion yuan in 2024-2026, up 17.81%, 22.79%, and 20.05% year on year; net profit to mother is 2.87, 3.54, and 421 million yuan, up 25.48%, 23.25%, and 18.82% year on year; maintaining the “increase” rating.
Risk warning: macroeconomic policy risk, impact of weak consumption, risk of medical malpractice, risk of merger and acquisition expansion falling short of expectations, increased risk of industry competition