2023 results are in line with market expectations
Opcom announced 2023 results: revenue of 1.74 billion yuan, up 13.9% year on year; net profit to mother of 0.67 billion yuan, up 6.9% year on year, corresponding to profit of 0.74 yuan per share; net profit after deducting non-return to mother of 0.57 billion yuan, up 2.3% year on year; performance is in line with market expectations.
Development trends
Product-side growth fell slightly short of expectations in '23, and we expect a gradual recovery in '24. 1) Hard corneal contact lenses:
In '23, corneal plastic mirrors achieved revenue of 0.82 billion yuan, up 7.1% year on year. The growth rate was lower than expected, mainly due to weak demand for high-end lenses throughout the year and increased competition for corneal reshaping lenses, etc.; 2) Nursing products: Revenue from nursing products was 0.26 billion yuan in '23, and revenue declined, mainly due to increased competition from e-commerce platforms and a rise in gross margin. The main reason was that the company increased its promotion of self-produced high-margin products; 3) Ordinary frame mirrors and others: 23 Ordinary frame mirrors and other products achieved annual revenue of 0.35 billion yuan, an increase of 70.5% over the previous year, mainly from sales revenue from new subsidiary companies and revenue growth from non-hard mirror products such as defocus frame mirrors.
The medical services sector grew significantly in '23, and the optometry service network continued to expand. In '23, the company's medical service sector achieved operating income of 0.3 billion yuan, an increase of 19.5% over the previous year, higher than the revenue growth rate of the product sales sector. The main reason was that the company controlled medical institutions maintained a good development trend; gross profit of 0.22 billion yuan, and gross margin remained stable. In 2023, the company continued to promote brand building and scale expansion of optometry service terminals, adding more than 300 cooperative terminals throughout the year. Currently, the total number of terminals that have established cooperative relationships is about 2,000, and it also owns and shares in more than 400 optometry service terminals. The company revealed that in the future, it will continue to expand its own optometry brand building, raise the level of chain management of optometry service terminals, and increase the share of revenue from terminals that can be independently controlled. We expect it will help the company develop new performance growth points and maintain competitiveness in the optometry industry.
Profit side growth slowed in '23 and is awaiting gradual restoration. The gross profit margin of the company's main business in 2023 was 74.8%, down 2.1ppt year on year; net profit margin to mother was 38.4%, down 2.5ppt year on year; net profit margin after deducting non-return to mother was 32.9%, down 3.7% year on year. The year-on-year increase in net profit attributable to the mother in fiscal year 23 was mainly due to the low level of gross profit of the new consolidated subsidiary and the significant year-on-year increase in sales expenses. We believe that as the scale effect of the company expands and optometry terminals gradually climb, the profit margin of the core business is expected to gradually recover in the future.
Profit forecasting and valuation
Considering the demand-side changes caused by the overall economic environment, we lowered the 2024 EPS forecast by 3.2% to 0.83 yuan, and the 2025 EPS forecast by 8.9% to 0.90 yuan. The current stock price corresponds to the 2024/25 price-earnings ratio of 22.4/20.7 times. Considering the current low valuation of the sector and the company, as well as the company's medium- to long-term profit stability, it maintains an industry rating and target price of 22.8 yuan, which corresponds to a price-earnings ratio of 27.5 times/25.3 in 2024/25, with 22.6% upside compared to the current stock price.
risks
The launch of new products fell short of expectations; the profit situation of service terminals fell short of expectations; the competitive landscape of the industry deteriorated.