Brief performance review
On April 26, 2024, the company released its report for the first quarter of 2024. In Q1 2024, the company achieved revenue of 465 million yuan (+15.7%, same period below); net profit to mother of 193 million yuan (+11.4%); net profit after deducting non-return to mother of 167 million yuan (+11.6%).
Management analysis
Hard lenses and nursing products are basically the same, and holding terminals are growing well. By product, the company's product sales and medical services both increased in Q1 of 2024, and medical service revenue grew at a high level. In terms of product sales, non-hard mirror products such as medical devices and functional framed mirrors achieved high growth, while hard lenses and nursing products remained flat. Among them, hard mirror products continued to grow in the company's controlled optometry terminals and private channels, but sales revenue from public hospital channels (including public hospital optometry centers) declined; nursing products stopped the downward trend last year, and the share of nursing products produced by the company increased dramatically. In terms of channels, the increase in revenue of the company's holding terminals was higher than the increase in overall revenue, and its share in total revenue increased further. By the end of '23, the company's terminal business accounted for 48.79% of total revenue. In total, it has held and participated in more than 400 optometry service terminals. As the company continues to expand the number of terminals, I am optimistic that terminals will continue to contribute to the company's performance growth.
Sales expenses have increased, and changes in product structure have reduced gross profit margins. In 2024, the company's sales expense ratio was 23.64%, +4.81 pct year on year, 2.97 pct year on year, 2.97 pct year on year, R & D cost ratio was 1.75%, -0.21 pct year on year. The increase in sales expenses is mainly due to: 1) the company increased sales and technical support personnel, and the corresponding increase in expenses such as labor costs and operating expenses; 2) the initial revenue scale of newly built stores was small, but fixed expenses (such as amortization of decoration costs, equipment depreciation, rent, and personnel wages, etc.) were large; 3) some of the additions and subsidiaries accounted for relatively high sales expenses. In 2024, the company's gross margin was 76%, -2.36pct year on year, and the net profit margin was 45.61%, and -3.62pct year on year. The gross margin declined mainly because the revenue growth of “ordinary framed mirrors and others” and “medical services” was higher than that of hard mirror products, which increased their share of revenue, and their gross margin was lower than that of hard lenses.
Profit Forecasts, Valuations, and Ratings
The company's product matrix continues to be rich. Ultra high oxygen permeable keratoplasty lenses and sclera scopes have also been submitted for registration. Phase III clinical trials of low concentration atropine sulfate eye drops (0.01% and 0.02% concentrations) have begun, and I am optimistic that the company will gradually expand the new growth curve. It is estimated that in 2024-2026, the company's net profit to mother will be 749/88/ 999 million yuan, respectively, up 12%/16%/15% year over year, EPS will be 0.84/0.97/1.11 yuan respectively, and PE corresponding to the current price will be 22/19/16 times, respectively, maintaining the “increase” 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.