Core views:

Huaxia Ophthalmology announced 2023 and 2024Q1 results. In 2023, the company achieved operating income of 4,013 billion yuan, +24.12% year on year; net profit to mother of 666 million yuan, +29.60% year over year; net profit after deducting non-return to mother of 662 million yuan, +22.37% year on year. In 2024Q1, the company achieved operating income of 978 million yuan, +5.09% year on year; net profit to mother 156 million yuan, +3.75% year over year; net profit after deducting non-return to mother was 157 million yuan, +6.89% year on year.

23. Performance grew steadily, and 24Q1 performance was weighed down by the macroeconomic environment. According to the company's annual report, the backlog of demand for optional dates represented by cataract surgery during the pandemic was quickly released in 23 years, which contributed to the rapid growth of the company's performance. By business, the cataract business achieved revenue of 987 million yuan, +31.38% year over year; back end business revenue of 535 million yuan, +26.94% year over year; refractive business revenue of 1,207 million yuan, +12.43% year over year; and optometry business of 1,017 million yuan, +14.94% year over year. Affected by the macro environment in 24Q1, the growth rate of the company's consumer business, such as refraction, has slowed. At the same time, eye disease businesses such as cataracts are under great pressure due to a high base in the same period last year. It is expected that the whole year will return to a healthy growth trajectory as the external environment improves.

Mergers and acquisitions are about to be implemented, which are expected to boost full-year results. According to the acquisition announcement issued by the company on April 26, Huaxia Ophthalmology plans to use its own capital and part of the overraised capital to acquire 100% of the shares of Xiamen Huaxia Juxin No.1 Investment Consulting Co., Ltd., with a transaction amount of about 500 million yuan. The company directly or indirectly controls a number of ophthalmology hospitals, and after the merger and acquisition is completed, it will be merged into Huaxia Report, which is expected to increase its annual performance.

Profit forecasting and investment advice. Affected by the macro environment, the company's short-term performance is under pressure, but we are optimistic about the long-term development of the ophthalmology industry and the company's differentiated top three hospital brand leadership models. At the same time, the company's latest M&A project is also expected to boost its future performance. The company's net profit for 24-26 is estimated to be 8.92 billion yuan, 10.89 billion yuan, and 1,333 million yuan, respectively. The company was given a 24-year PE 35X valuation, corresponding to a reasonable value of 37.17 yuan/share, maintaining a “buy” rating.

Risk warning. Chain business model expansion risk, medical accident risk, and health insurance fee control risk.