Incidents:
On the evening of March 26, 2024, Chaoju Ophthalmology released its 2023 report. The company achieved main operating income of 1,370 million yuan (+38.33%), gross profit of 621 million yuan (+42.89%), profit during the year of 221 million yuan (+20.49%), and adjusted net profit of 223 million yuan (+19.84%).
Comment:
After the epidemic, marketing demand has recovered, and the cost rate is in the adjustment period. ① In terms of cost ratio, the sales expenditure rate in 2023 was 7.67% (+1.48pct), and the administrative expenditure rate was 16.24% (-0.12pct). Marketing activities returned to normal after the epidemic was liberalized, and the cost rate increased slightly; ② In terms of gross margin, 2023 was 45.35% (+1.45pct), of which the gross profit ratio of basic ophthalmology was 41.55% (+6.93pct), and the gross profit margin of consumer ophthalmology was 49.14% (-2.41pct). The former was mainly due to the high impact of the epidemic, the cataract business volume was high and superimposed Cataract surgery has begun, and the latter is mainly due to newly built hospitals in the revenue climbing period; ③ In terms of annual profit margin, it was 16.12% (-2.39pct) in 2023, mainly due to higher other expenses (60 million yuan) and an increase in the actual tax rate to 26.24% (+2.84pct, related to increased payout income tax).
Basic ophthalmology and consumer ophthalmology go hand in hand. In 2023, the company's basic ophthalmology business revenue was 654 million yuan (+46.26%), and consumer ophthalmology business revenue was 709 million yuan (+30.64%). At the current point in time, we need to pay close attention to ① the geographical characteristics of the refractive business, as well as the upward and downward hedging of the increase in penetration rate and price of surgical upgrades; ② the cataract business has a hedging between ASP and gross margin due to the reduction in the price of crystal procurement; ③ optometry services also have a counterbalance between the slowdown in the angle plastic industry and the rapid increase in penetration rate of defocus lenses + low approved volume.
Mergers and acquisitions go hand in hand to actively expand the service network. In 2023, the company had a total of 31 ophthalmology hospitals (+7, 3 in Mengxi Bayannaoer+1 Ningxia, 1 in Beijing+1 in Hebei+1 in Zhejiang, of which Hebei Zhangjiakou Hospital and Zhejiang Zhoushan Hospital were self-built) and 29 optometry centers (+3, 1 in Mengxi Bayannaoer+ 1 in Ningxia + 1 in Hebei, of which the Hebei Zhangjiakou Optometry Center was self-built). The company continues to promote the coverage network in North China to achieve layout interaction in Mengdong, Mengxi, Hebei, Shanxi, and Ningxia; at the same time, it has expanded the Yangtze River Delta layout network. By the end of the reporting period, it had achieved the layout of a total of 8 hospitals and 7 optometry centers in Jiangsu and Zhejiang.
Profit forecast and investment advice: The company is the leading private ophthalmology service provider in Inner Mongolia, continuing to strengthen its influence in North China and expand the network layout of the Yangtze River Delta market. We expect the company's revenue in 2024-2026 to be RMB 16.52/19.67 billion RMB, net profit to mother of RMB 2.76/ 3.29/ RMB 392 million, and the corresponding PE is 8.9X/7.5X/6.3X. For the first coverage, we gave the company an “gain” rating.
Risk warning: policy risk, risk of hospital expansion falling short of expectations, and increased risk of industry competition.