Key points of investment:
Announcement: Aier Ophthalmology Releases 2023 Annual Report and 2024 First Quarter Report? Reviews:
Results returned to high growth in 2023, and profit margins continued to rise in the first quarter of 2024. In 2023, the company's revenue was 20.367 billion yuan (+26.43%), gross profit margin of 50.79% (+0.33pt), net profit to mother of 3.359 billion yuan (+33.07%), after deducting non-net profit of 3,514 billion yuan (+20.39%). In the first quarter of 2024, revenue of 5.196 billion yuan (+3.50%), gross profit margin of 48.29% (+0.80pt), net profit to mother was 899 million yuan (+15.16%), net profit after deducting non-net profit of 843 million yuan (+12.04%).
The “1+8+N” strategic layout has been steadily implemented, and the internationalization strategy continues to advance. The “1+8+N” strategy is progressing steadily. Ophthalmology centers in Changsha, Shanghai, Guangzhou, Chengdu, and Chongqing are already in operation; construction is underway in Wuhan and Shenyang; preparations have begun in Beijing and Shenzhen; the regional medical network layout in the provinces and regions has been improved through new construction or acquisitions; and investment in optometry clinics (clinics) has been further strengthened. As of the reporting period, the company had 256 hospitals and 183 outpatient departments. At the same time, the overseas layout continued to advance, increasing to 131 ophthalmology centers and clinics, gradually forming a global medical service network.
Refractive optometry projects continued to grow rapidly, and a backlog of demand was released after the cataract comprehensive eye disease epidemic. In 2023, the company achieved 15.1064 million outpatient visits, a year-on-year increase of 34.26%; the number of surgeries was 1.1837 million, an increase of 35.95% year-on-year. By business segment:
(1) The proportion of individualized procedures in the company's refractive projects increased in 2023, while strengthening the construction of refractive departments in primary hospitals, with revenue of 7.431 billion yuan (+17.27%) and gross profit margin of 57.40% (+0.58pct).
(2) With the promotion of the national myopia prevention and control strategy and the promotion of the company's 5P system, the optometry business achieved significant growth, with revenue of 4.960 billion yuan (+31.25%) and a gross profit margin of 57.05% (+0.61pct).
(3) With aging and the impact of brand benefits, some elderly patients achieved rapid growth in cataract programs due to external environmental delays, with operating income of 3.327 billion yuan (+55.24%) and gross profit margin of 37.97% (+2.63pct).
(4) Current project: operating income of 1,791 billion yuan (+33.74%), gross profit margin of 45.68% (+1.22pct).
(5) Future projects: operating income of 1,386 billion yuan (+31.31%), gross profit margin of 34.67% (+1.06pct).
Technological innovation enhances the transformation of achievements and synchronizes international technological development. The company continues to adhere to the “innovation-driven, technology-driven” development strategy, strengthen the construction of scientific research and innovation platforms, and enhance the ability to transform scientific research results. During the reporting period, the company was approved 4 new key platforms; at the same time, strategic cooperation agreements were signed with Northeastern University, Shanxi Medical University, and Dalian Medical University; the company was approved for a total of 69 vertical projects, including 2 national projects, 53 provincial projects, 14 city-level projects, and 81 horizontal projects (including GCP projects); the company's experts published 107 papers in SCI/Medline journals, 42 papers in Chinese core journals/statistical source journals, 14 monographs in chief editor or participating in the industry consensus guide/editor part.
Profit forecast and investment advice: We believe that the ophthalmology market is in high demand. As the company gradually upgrades leading hospitals in the region, the company's development trend will continue to improve in the new decade, and its long-term competitiveness and moat will continue to increase. We expect the company's revenue for 2024-2026 to be 239.07, 28.837, and 34.552 billion yuan, up 17.4%, 20.6%, 19.8% year on year, and net profit to mother of 41.24, 49.88, and 6.091 billion yuan, up 22.8%, 21.0% and 22.1% year on year. We used the DCF method for valuation. Under the assumption of a sustainable growth rate of 1.6%-2.4% and a WACC value of 9.4%-10.2%, based on sensitivity analysis, we estimate that the company's reasonable market value range is 1743-1925 billion yuan, corresponding to a reasonable value range of 18.69-20.64 yuan/share per share, and the corresponding 2024 PE multiplier is 42-47 times. Based on the comparability of the main business and medical service business, Huaxia Ophthalmology, and Tongze Medical were selected as comparable companies. According to Wind's unanimous forecast, the average PE ratio of comparable companies in 2024 was 30 times higher. We believe that considering the definitive growth of the company's endogenous and epitaxial growth, the company's medical network advantages continue to be highlighted, and its competitiveness as a leading private ophthalmology enterprise continues to increase, giving it a “superior to the market” rating.
Risk warning: risk of declining spending growth in the medical industry; risk of medical accidents; increased risk of market competition; risk of delayed injection of M&A funds in hospitals; risk of tightening health insurance policies.