Introduction to this report:
The growth of square plastic is under pressure, and the development trend of framing mirrors and medical services is good. The performance is basically in line with expectations, and the rating of prudent increase in holdings is maintained.
Key points of investment:
Maintain a prudent accumulation rating. 2024H1 achieved revenue of 0.883 billion yuan (+13.21%) and net profit of 0.324 billion yuan (+4.42%); of these, 2024Q2 achieved revenue of 0.419 billion yuan (+11.42%) and net profit of 0.131 billion yuan (-4.36%) to mother. The performance was basically in line with expectations.
Considering phased cost investment, the 2024-2026 EPS forecast was lowered to 0.80/0.92/1.06 yuan (previously 0.86/0.99/1.14 yuan), and the 2024 PE22X was given, corresponding to the target price of 17.60 yuan, maintaining a cautious holdings increase rating.
The growth of square plastic is under pressure, and the development trend of new products is good. By product: (1) 2024H1 square plastic achieved revenue of 0.373 billion yuan (-3%), and is still affected by weak high-end consumption, the increase in square plastic brands, and the loss of some potential users of defocus lenses. The company effectively stabilized the revenue of square plastic by introducing preferential packages to reduce user usage costs, launch special products, and increase sales and technical support personnel; (2) nursing products achieved revenue of 0.117 billion yuan (-4%). The promotion led to a slight decline in revenue, but the company's gross margin was the same as the same by vigorously promoting self-produced nursing products. Significantly increased 6.66pp to 60.65%; (3) revenue from other optometry products and technical services such as framed mirrors was 0.161 billion yuan (+44.28%), achieving good growth; non-optometry revenue increased 19.91% year-on-year, mainly due to the increase in medical equipment and consumables revenue of consolidated subsidiaries; (4) medical service revenue of 0.191 billion yuan (+46%). Due to the rapid growth of new and consolidated hospitals, gross margin decreased by 8.81 pp to 64.97%, mainly due to the rapid growth of hospitals with lower gross margins As of 2024H1, the number of holding and participating vision centers reached 470+, showing a steady growth trend. The growth rate of terminal revenue also clearly surpassed distribution and direct sales, accounting for 52.95%, and the development trend is good.
The phased increase in sales investment affects net profit margins. 2024H1's gross profit margin of 73.77% (-1.8pp) is mainly due to a decline in the share of square plastic revenue with high gross margin. Sales/management/R&D/finance expense ratios were +3.4/-1.2/-0.1/+0.7pp, respectively. The sales cost ratio increased due to the increase in sales staff and technical support personnel and the development of promotional activities. It is expected that labor efficiency outside of East China will gradually increase in the future.
The product lineup under development is rich. The company has a rich lineup of follow-up products, including next-generation angular plastic materials, multi-focal soft lenses, lubricants, nursing solutions, eye comfort devices, etc., progressing normally, and there is plenty of room for development.
Risk warning: competition increases risk, commercialization of new products falls short of expectations, etc.