The company released a performance forecast for the first half of 2024: net profit due to 2024H1 was 0.084-0.093 billion yuan (+4.3% ~ +15.9%), single Q2 was 0.041-0.051 billion yuan (-8.3% ~ +12.3%), and the median value was 0.046 billion yuan (+2.0% year over year). The company's 2024Q2 revenue and profit performance was stable, and the overall domestic consumption environment continued to be weak. The company achieved steady growth through the upgrading of its product structure and steady promotion of a large single product strategy, and its profitability increased steadily.

The big single product strategy is progressing steadily, and product upgrades drive growth. The company focused on the “1+3” big single product strategy. The core products Easy Control Series, PMC Super Bright Series, 1.71 series, and anti-blue light lenses grew beautifully. 2024Q1's PMC/1.71/anti-blue light series revenue was +77%/+33%/+22%, respectively, and the share of the three star products further increased to 54%. The Easy Control series of products currently has 4/8 SKUs in the retail channel generation/second generation and 12 SKUs in the medical channel, covering the four refractive indices of 1.56/1.60/1.67/1.71. The richness of the product matrix is significantly ahead of the industry.

Industrial cooperation is deepening, and Leica cooperation is about to be implemented. In April 2024, the company announced that it had reached an exclusive cooperation agreement with the legendary global photography and optics brand Leica in the field of lenses. The two sides will deepen all-round cooperation in brand operation, technology research and development, accurate imaging, optical design, precision manufacturing, marketing, etc., to jointly open a new chapter in China's high-end lens market. A joint press conference between the company and Leica is scheduled to be held in the second half of 2024, and industrial cooperation will be deepened.

Profit prediction and investment rating: The volume and price of the company's traditional lenses have risen sharply & the structure has been optimized, the retail channel of defocus lenses has accelerated penetration & the medical channel is poised to advance, and profitability is rising steadily. We expect net profit due to mother for 2024-2026 to be 0.18 billion yuan, 0.22 billion yuan, and 0.26 billion yuan, respectively. The corresponding PE is 23.7X, 19.6X, and 16.2X, respectively, maintaining a “buy” rating.

Risk warning: Prices of raw materials fluctuate, terminal demand falls short of expectations, and the development of a new market for myopia prevention and control falls short of expectations.