Brief performance review
On March 29, 2024, the company released its 2023 annual report. In 2023, the company achieved revenue of 1,737 billion yuan (+13.9%, same below); net profit attributable to mother of 667 million yuan (+6.9%); net profit of non-return to mother of 572 million yuan (+2.3%).
Looking at a single quarter, the company achieved revenue of 418 million yuan (+32.9%) in Q4 of 2023; net profit to mother of 129 million yuan (+8.4%); net profit after deducting non-attributable net income of 101 million yuan (+5.7%).
Management analysis
Timely adjustment of strategies, marginal improvements in lenses and care products. By product, the company's revenue for hard corneal contact lenses in 2023 was 817 million yuan (+7.1%); revenue from nursing products was 263 million yuan (-12.0%); medical revenue was 302 million yuan (+19.5%); and revenue from ordinary framed lenses and others was 345 million yuan (+70.5%). In Q4 2023, the company's hard corneal contact lens revenue was 141 million yuan (+21.5%). According to the company's announcement, the company took a number of measures, such as increasing marketing efforts such as brand promotion, academic promotion, personnel training, and sales enablement, to slow down the downward trend in lens sales and stabilized in the third quarter and rebounded in the fourth quarter. In Q4 2023, the company's nursing product revenue was 76 million yuan (+16.5% month-on-month). The results of the company's initiatives such as setting up an independent online sales team, increasing the promotion of self-produced nursing products, and launching self-produced hydrogen peroxide disinfectant products by the end of '23 have shown results.
Investment in sales expenses has increased, and ongoing research projects are progressing steadily. In 2023, the company's sales expense ratio was 21.7%, +2.33pct year on year, 6.79%, -1.49pct year on year, R&D expenses rate was 2.32%, +0.12pct year on year. The increase in sales expenses is mainly due to: 1) the company has increased its on-site sales and technical support capabilities; 2) the initial income of newly built stores is low, but fixed expenses such as rent and decoration sharing are large. In 2023, the company's gross margin was 74.78%, -2.11pct year on year, and the net profit margin was 41.96%, and -3.71 pct year on year. The decline in gross margin was mainly due to the relatively large but low gross margin of medical equipment and consumables sales revenue of the new consolidated subsidiary. The company's ongoing research projects are progressing normally, such as submitting registration declarations for ultra-high oxygen permeable corneal shaping lenses and sclera scopes made from second-generation materials, and initiating phase III clinical trials with low-concentration atropine sulfate eye drops (0.01% and 0.02% concentrations), a holding subsidiary of Op Vision.
Profit Forecasts, Valuations, and Ratings
Based on the company's development situation, we lowered our 2024-2025 revenue and profit forecast. The original forecast value of revenue for 2024-2025 was 20.87/2,526 billion yuan, and the original forecast value of net profit to mother was 8.24/991 billion yuan. Currently, revenue for 2024-2026 is 20.31/23.46/2,686 billion yuan, respectively, up 17%/16%/14% year on year, respectively, and net profit to mother is 7.49/86.999 million yuan, respectively, up 12%/16%/15% year on year, respectively. EPS is 0.84/0.97/1.11 yuan respectively, and the corresponding PE price is 22/19/16 times, respectively, maintaining the “gain” rating.
Risk warning
Medical malpractice risk; industry competition increases risk; risk of impairment of goodwill; risk of optometry service terminal construction falling short of expectations.