Incident: The company announced that in the first half of 2024, the company achieved operating income of 1.404 billion yuan (+6.97%, indicating year-on-year growth rate, same below), net profit of 0.235 billion yuan (+14.64%) to mother, net profit of 0.23 billion yuan (+22.66%) after deducting non-return to mother net profit of 0.23 billion yuan (+22.66%). In the 2024Q2 quarter, the company achieved operating income of 0.758 billion yuan (+8.10%), net profit due to mother 0.138 billion yuan (+11.03%), and net profit of non-return to mother 0.135 billion yuan (+16.26%).

The medical and aesthetic sector grew 25% + year over year, and hyaluronic acid increased 50% + year over year. 2024H1, the medical and aesthetic sector achieved a total revenue of 0.634 billion yuan, an increase of 25.72% over the previous year. Among them, hyaluronic acid series products earned 0.417 billion yuan (+51.30%), human epidermal growth factor earned 81.23 million yuan (+8.11%), and RF and laser equipment achieved revenue of 0.136 billion yuan (-11.54%). The decline in medical and aesthetic equipment revenue is mainly due to the fact that since April 1, 2024, the regulatory category of radiofrequency treatment equipment products has been upgraded from Class II to Class III medical devices. Sales of household and lifestyle beauty grade products in the company's RF equipment product line have been greatly negatively affected in mainland China. Revenue from high-end product lines such as third-generation hyaluronic acid “Sea Charm” and “Sea Beauty” is rising rapidly, while driving the first and second generation hyaluronic acid products to achieve relatively rapid growth. In July 2024, the company's fourth-generation hyaluronic acid product “Haimei Moon White” was approved. It has characteristics such as better long-term safety, longer efficacy, and can stimulate local collagen growth, and is expected to continue the high growth rate of the high-end hyaluronic acid product line.

Overall revenue growth in ophthalmology is under pressure, and new OK lenses are growing well. 2024H1, the ophthalmology sector achieved revenue of 0.452 billion yuan, a year-on-year decline of 6.02%. Among them, intraocular lenses achieved revenue of 0.181 billion yuan (-10.84%), the British subsidiary Contamac optometry materials business revenue 0.108 billion yuan (-2.60%), optometry terminal products (mainly including OK mirrors) revenue of 93.53 million yuan (-2.26%), and revenue of other ophthalmic products 18.68 million yuan (+25.99%). The decline in intraocular crystal revenue was mainly due to the gradual implementation of intraocular crystal collection in the second quarter; the decline in optometry materials was mainly related to the cyclical impact of downstream manufacturers on the preparation of raw materials; the decline in revenue from the old brand “Hengtai Hiline” was mainly affected by weak consumption and market competition. The revenue of the new brands “Meierkang MyOK” and “Children's Enjoy” 2024H1 increased by 48.6% and 189.9%, respectively, over the same period last year.

The orthopedic sector is generally stable, while the surgical sector declined slightly. 2024H1, the orthopedic sector achieved revenue of 0.233 billion yuan (+0.42%). Among them, sodium hyaluronate injections earned 0.15 billion yuan (-0.77%), and the new material medical chitin sugar (for intra-articular injection) earned 82.96 million yuan (+2.65%). The surgical sector achieved revenue of 69.17 million yuan (-2.49%), of which medical chitin (for anti-adhesion) earned 30.62 million yuan (-12.38%), which had a significant impact.

Profit forecast and investment rating: Maintain the estimated 2024-2026 net profit of the company to be 0.511/0.632/0.761 billion yuan, respectively, and PE corresponding to the current market value is 27/22/18 times, respectively. Considering the rapid growth of the company's medical and aesthetic products, it is expected to recover after ophthalmology digestive collection and maintain a “buy” rating.

Risk warning: Risk of product development or promotion falling short of expectations, increased risk of market competition, etc.