Matters:
On April 25, 2024, the company released its 23 annual report and 24 quarterly report. In 2012, the company's revenue was 20.367 billion yuan (+26.43%), net profit attributable to mother was 3.359 billion yuan (+33.07%), and net profit not attributable to mother was 3,514 billion yuan (+20.39%). 24Q1: The company's revenue was 5.196 billion yuan (+3.50%), net profit attributable to mother was 899 million yuan (+15.16%), and net profit of non-return to mother was 843 million yuan (+12.04%).
Commentary:
The cataract business led growth for 23 years. By business, the company's refractive revenue in '23 was 7.431 billion yuan (+17.27%), cataract revenue was 3.327 billion yuan (+55.24%), immediate revenue was 1,791 billion yuan (+33.74%), backstage revenue was 1,386 billion yuan (+31.31%), and optometry revenue was 4.960 billion yuan (+31.25%). Looking at the subregion, the company achieved revenue of 5,528 billion yuan (+16.73%) in central China in '23, accounting for 27.14%, and is still the region contributing to the company's core revenue. The growth rate of the company's cataract business in 23 years was impressive, mainly due to: 1) the aging population, the continuous improvement of the company's ophthalmology technology and service capabilities, and the continuous expansion of business scale and brand influence; 2) delays in the external environment led to the concentrated release of medical needs of some elderly patients.
Profitability has remained generally stable. In 2023, the company's gross profit margin was 50.79% (+0.33pct). By business, the gross margins for refraction, cataract, anterior eye, posterior eye, and vision were 57.40%, 37.97%, 45.68%, 34.67%, and 57.05%, respectively, +0.58, 2.63, 1.22, 1.06, and 0.61 pct, respectively. In '23, the company's sales expenses were 1,966 billion yuan (+26.40%), and management expenses were 2,669 million yuan (+16.38%), mainly due to the accelerated expansion of the company's size. In '23, the company introduced health education talents, and the increase in labor remuneration and expenses for popular science activities led to an increase in sales expenses and management expenses. 24Q1 company gross profit margin of 48.29% (+0.80pct), sales expenses ratio 9.35% (+0.00pct), management expenses ratio 13.45% (+0.19pct), net profit margin of 16.22% (+1.24pct) after deducting non-return to mother.
Optimistic about the company's long-term development and maintaining a “recommended” rating. According to the company's latest quarterly report and operating conditions, considering the weak short-term consumption power or impact on the company's performance, we adjusted the company's revenue forecasts for 2024-2026 to 25.259 billion yuan, 30.414 billion yuan, and 36.507 billion yuan, respectively (the previous 24 and 25 year revenue forecasts were 267.49 billion yuan and 33.912 billion yuan), up 24.0%, 20.4%, and 20.0% year-on-year; net profit to mother was 40.15, 49.65 billion yuan, and 6.090 billion yuan (the previous 24 and 25 years ago) The parent net profit forecast is 45.95 billion yuan and 5.907 billion yuan), up 19.5%, 23.7%, and 22.7% year over year. Considering the company's dominant position in the industry, referring to comparable companies and historical valuations, we gave the company a target PE of 35 times for 24 years, corresponding to a target price of 15 yuan for 24 years. Maintain a “Recommended” rating.
Risk warning: the risk of a price war for refractive surgery, the risk of fluctuations in the net profit of newly built hospitals, the risk of public opinion due to medical accidents, etc.