The 2023 full-year results are in line with market expectations. The 1Q24 profit side slightly exceeded market expectations. Aier Ophthalmology announced 2023 and 1Q24 results: 2023 revenue of 20.37 billion yuan, up 26.4% year on year; net profit to mother of 3.36 billion yuan, up 33.1% year on year, in line with market expectations; 1Q24 achieved revenue of 5.20 billion yuan, up 3.5% year on year, net profit of 90 million yuan, up 15.2% year on year. The profit side slightly exceeded market expectations, mainly due to the continuous decline in hospitals and continuous optimization of gross margin of core business.
Development trends
Revenue and profit growth was impressive in 2023, and 1Q24 remained steady. In 2023, the company's revenue was 20.37 billion yuan, up 26.4% year on year, and net profit to mother was 3.36 billion yuan, up 33.1% year on year. Performance growth was impressive. By business, revenue from the refract/optometry/cataract business in 2023 was 74.3/49.6/3.33 billion yuan respectively, up 17.3%/31.3%/55.2% year-on-year. Businesses with strong optional attributes such as refractive optometry were affected to a certain extent by the general environment, and the backlog of demand for serious medical treatment such as cataracts and eye diseases was quickly released. 1Q24 maintained steady growth, with revenue up 3.5% year over year. Among them, we estimate that refractive business revenue increased nearly 5% year over year, while cataract and optometry business remained stable year over year. Taking into account the further release of demand in the ophthalmology industry and changes in the macroeconomic environment, we believe that the company's 2024 performance is expected to improve quarterly.
The global medical service network has been gradually improved, and medical service capacity continues to improve. By the end of 2023, the company had 256 domestic hospitals, 183 outpatient departments, and 131 overseas institutions, and the medical service network continued to improve. The company announced the acquisition of 19 and 7 hospitals in September and November 2023, and will contribute a considerable increase in performance after mergers in the future. The company's service scale increased rapidly in 2023, achieving 15.11 million outpatient visits throughout the year, an increase of 34.3% over the previous year; the number of surgeries was about 1.18 million, an increase of 36.0% over the previous year.
Digitalization promotes the improvement of service quality, and the medical education and research system guarantees long-term development. The company is actively developing digital technologies such as artificial intelligence. In 2023, it launched the “Ultra Photo Real-time Interactive Digital Person” - EYEGPT, which lays the foundation for building a high-quality medical service system. The company has built an integrated innovation platform for medical education and research with “multiple hospitals,” “multiple sites,” “five stations,” “five centers,” “four bases,” “one platform,” and “one room.” By the end of 2023, it had cooperated with 15 domestic universities to continuously inject vitality into the company's long-term positive development.
Operating indicators remain stable, and profitability continues to improve. In 2023, the company's gross profit margin was 50.8%, up 0.33ppt year on year; sales expenses ratio was 9.7%, which was basically the same; net profit margin to mother was 16.5%, up 0.82ppt year on year. 1Q24 gross profit margin was 48.3%, up 0.80ppt year on year, net profit margin to mother 17.3%, up 1.75ppt year on year. We expect overall profitability to continue to improve as the company's brand influence continues to increase and market demand expands.
Profit forecasting and valuation
Maintain the 2024-25 EPS forecast of 0.45 yuan and 0.56 yuan. The current price corresponds to 2024-25 27.4/22.0xp/E. Maintaining an outperforming industry and target price of 19.6 yuan, corresponding to 2024-25 43.9/35.2x P/E, with room for 60.1% increase compared to the present.
risks
The performance of newly built or acquired hospitals fell short of expectations; industry competition intensified; medical emergencies.