Opcom released a quarterly report. Under pressure from the industry, growth was steady, in line with expectations: 24Q1, the company achieved revenue of 465 million yuan/ +15.71%, net profit to mother of 193 million yuan/ +11.39%, after deducting 167 million yuan/ +11.59%. Revenue and profit growth rates were close to that.
The core product OK Mirror faces strong competition, and revenue is stable: In terms of OK Mirror, the industry's growth rate is declining due to factors such as weak consumption power, the number of competing defocus lenses, and the increase in new brands. As a leading company, OPP strives to take measures to stabilize sales on the sales side. Channel side merger and acquisition terminals increase market share, and ultimately achieve continuous growth in holding terminals and private channels, and a decline in public channel revenue.
Nursing products have stopped the downward trend. Due to the relatively low threshold for nursing products, increased competition, and the increase in the share of e-commerce channels, the company's nursing product revenue fell 12.02% in '23. The company strengthened online channel promotion. 24Q1 revenue remained basically flat year-on-year, and the share of its own brands increased dramatically, and gross margin is expected to increase.
The pace of mergers and acquisitions of terminals continues, driving the growth of medical services and ordinary frame mirror revenue: in '23, the company's holding subsidiaries contributed 49% of revenue. By the end of '23, it had 400+ participating terminals, and the chain operation was further promoted.
Profitability: The company's gross profit margin of 76% /-2.36pct, mainly due to changes in product structure, the increase in the proportion of low-margin medical services & ordinary frame mirrors; sales rate 23.64% /+4.81pct, mainly due to the company's increased marketing and promotion efforts, increased sales and technical support personnel, merger and acquisition terminals, etc.; management rate 2.72% /-2.97pct, mainly due to reduced equity incentive expenses; financial expenses 0.16% /+0.71pct; final net profit margin of 45.61% /-3.62pct, net mother interest rate 41.54% /-1.61pct, minority shareholders' equity accounting for 8.14%, and merger and acquisition subsidiaries contributed steadily to performance.
The company has set up a number of medical and health-related industry funds, focusing on developing industries around optometry and even general health. In addition, it is actively laying out other optometry tracks: 1) Jointly funded the establishment of Opal Vision with Zhejiang Vision, which is controlled by the company, has 0.01% and 0.02% global rights in low concentrations of atropine, and has initiated phase III clinical work related to 2 low concentrations of atropine; 2) Reached a strategic cooperation with Hefei Three Sheep and established a joint venture to establish Opus Sanyang Technology, which is controlled by the company to lay out the contact lens circuit; 3) Invest in the technology company that holds visual functions and oblique vision training products - Zhuhai Guangrui Vision has training products Certificate of registration.
Investment advice: As a leading enterprise deeply involved in the optometry industry, the company continues to introduce new products for myopia prevention and control. We believe that in the future, the company's growth direction will be more diversified and its ability to withstand risks will be stronger. The company has now actively carried out structural adjustments and is expected to return to the growth channel under new industry trends. We expect the company's net profit to be 737/8.19/915 million yuan respectively in 2024-2026, corresponding to the closing price of PE on April 26, 22/20/18 times, respectively, to maintain a “buy” rating.
Risk warning: weak spending power, increased competition, new business development falls short of expectations, etc.