The company released the 2023 annual report and 2024 quarterly report: 2023 operating income of 1,468 million yuan (YoY +17.42%), net profit of 240 million yuan (YoY +13.39%), net profit net of non-return to mother was 240 million yuan (YoY +15.59%); sales, management and R&D expenses were 535 million yuan (+15.51% YoY), 154 million yuan (YoY +17.08%), and 167 million yuan (YoY +14.89%), respectively. Expenses rates were 36.48% and 10.53%, respectively , 11.40%. 2024Q1 revenue of 350 million yuan, +22.10% year over year; net profit of 35 million yuan, +79.59% year on year; net profit after deducting non-return to mother of 0.35 million yuan, +126.46% year on year

By sector: In 2023, gel revenue was 374 million yuan (+18.37%), eye drops 662 million yuan (+47.86%), solution revenue was 51.92 million yuan (-8.89%), medical services were 351 million yuan (-13.49%), and other 28.23 million yuan (+21.43%).

Low-concentration atropine is already on the market, and market space can be expected. According to the company's 2023 annual report, 0.01% atropine eye drops obtained production approval in March 2024 (Sinopharm standard H20240320). It is the first low-concentration atropine eye drop to be marketed in China to delay myopia. 0.01% of 2-year clinical trials and 0.2%/0.4% clinical trials are in phase III and are progressing according to plan.

Focus on ophthalmic drug research and development to consolidate core advantages. The company's product layout covers ten ophthalmic drug categories, including dry eye, anti-infective, and anti-glaucoma. As of the disclosure date of the annual report, a total of 57 approval numbers have been obtained. Of these, 35 products are covered by medical insurance, and 6 products have been included in the national essential drug catalogue.

Many advances have been made in the research pipeline: sodium hyaluronate eye drops, trivoprost eye drops, and diquaphosphol eye drops obtained drug registration certificates; voriconazole eye drops completed phase I enrollment to treat fungal keratitis; ciclosporin eye drops (II) were enrolled for the first clinical case after completion of marketing.

Profit forecasting and investment advice. The company's 2024-2026 EPS is expected to be 7.43, 10.51, and 16.46 yuan/share, respectively. The company is about to launch low-concentration atropine, and market space for myopia prevention and control can be expected. The company will be given 40x reasonable PE in 2024, corresponding to a reasonable value of 297.35 yuan/share, maintaining a “buy” rating.

Risk warning. Pipeline progress fell short of expectations, market competition exceeded expectations, and product volume fell short of expectations.