The 2023 results are largely in line with our expectations
Chaoju Ophthalmology announced its 2023 results: revenue of 1.37 billion yuan, up 38.3% year on year; net profit to mother was 230 million yuan, up 21.9% year on year, corresponding to profit of 0.33 yuan per share, which is basically in line with our expectations.
Development trends
The scale of services increased significantly, and the main business revenue improved markedly after the pandemic. In 2023, the scale of services provided by the company expanded markedly, with 1.129 million outpatient visits (up 19.5% year on year), 67,000 hospitalizations (up 50.9% year on year), and 120,000 optometry center customers visited 120,000 (up 17.9% year on year). Among them, the average consumption of outpatient services increased 11.5% year on year to 698 yuan, and the unit price of optometry center customers increased 8.0% year on year to 806 yuan. After the epidemic, the company's demand for ophthalmology services was rapidly released. In 2023, consumer ophthalmology service revenue was 709 million yuan, up 30.6% year on year; basic ophthalmology service revenue was 654 million yuan, up 46.3% year on year, accounting for 47.8% of total revenue, up 2.6ppt year on year. Considering the sharp rise in the volume and price of the company's ophthalmology services and the balanced development of core business, and the gradual recovery in demand in the superposition industry, we believe that the company's revenue is expected to maintain a good year-on-year growth in 2024.
The store network continues to expand, and the medical team expands to enhance core competitiveness. 1) Steadily advance the “hospital cluster” strategy: By the end of 2023, the company had operated 31 ophthalmology hospitals and 29 optometry centers, an increase of 5 and 2 respectively from the beginning of the year (2 self-built ophthalmology hospitals, Zhoushan Chaoju and Zhangjiakou Chaoju). The company plans to continue to explore new markets with potential in the future. 2) Rapid expansion of the medical team: The company forms a high-quality medical team through a combination of external recruitment and internal training. By the end of 2023, the company had 1,428 full-time medical professionals (up 20.8% year over year), including 288 physicians (up 19.0% year over year), including 252 registered professional ophthalmologists (up 18.9% year over year). We believe that the rapid expansion of the high-quality medical team will help improve the company's core competitiveness.
Operating indicators remain stable, and there is room for optimization of profitability. The company's gross profit margin in 2023 was 45.4%, a year-on-year increase of 1.4ppt, and a year-on-year net profit margin of 16.7%, a year-on-year decrease of 2.2ppt. In 2023, the management expense ratio was 16.2%, a year-on-year decrease of 0.1 ppt; the sales expense ratio was 7.70%, an increase of 1.5ppt over the previous year, due to an increase in marketing expenses for new and acquired hospitals. We expect the company's profitability to increase further as the operations of newly built and acquired hospitals become more mature, and medical service capabilities continue to improve.
Profit forecasting and valuation
Considering the company's business recovery but the level of profitability needs to be improved, the 24-year EPS forecast was lowered by 16.1% to 0.39 yuan, and the 25-year EPS forecast was first introduced at 0.45 yuan. The current stock price corresponds to 24-25 8.7/7.1xP/E. The company's current valuation is already at an absolute low level, maintaining the “outperforming industry” rating, but considering the downward trend in the sector's valuation center, the target price was lowered by 32.3% to HK$5.20, corresponding to 11.9/9.7xp/E in 24-25, and there is 36.8% upside compared to the latest closing price.
risks
New and acquired hospitals fell short of expectations; changes in industry policies; medical emergencies.