Brief performance review

On August 16, 2024, the company released its 1H24 semi-annual report. In the first half of 2024, revenue, net profit to mother, and net profit without return to mother were 14.04 billion yuan, 2.35 billion yuan, and 230 million yuan, respectively, up 6.97%, 14.64%, and 22.66% year-on-year; 2Q24 achieved revenue, net profit to mother, and net profit after deduction of 7.58, 1.37, and 135 million yuan, respectively, in the first half of 2024, up 8.10%, 11.03% and 16.26% year-on-year. The performance was in line with expectations.

reviews

Driven by medical aesthetics and innovation, “Sea Charm” continues to drive a year-on-year increase of over 51% of hyaluronic acid. (1) Medical and aesthetic performance: In the first half of 2024, under an environment of overall consumption pressure, the company still obtained 0.417 billion yuan in revenue from the hyaluronic acid sector and achieved a year-on-year growth rate of 51% with the continuous efforts of the innovative hyaluronic acid product “Sea Charm”. Human epidermal growth factor revenue was 81.2268 million, up 8.11% year on year; radio frequency and laser equipment revenue was 0.136 billion yuan, down 11.54% year on year. (2) Driven by innovation: The company's third-generation hyaluronic acid product “Haimi” has the characteristics of no granulation and high cohesiveness. It is not easy to deform and shift after injection, and maintains a more natural and long-lasting effect. It has a high-end market positioning, and has contributed a considerable increase in the revenue of the hyaluronic acid product line.

In the second half of the year, as the production license application for the company's fourth-generation organic crosslinked hyaluronic acid “Haimei Moon White” progresses, we expect the company's fourth-generation hyaluronic acid brand portfolio to have better marketing progress; while the increase in revenue in the high-margin hyaluronic acid sector will lead to higher profit side growth for the company.

Ophthalmology, ready to go, innovative hydrophobic intraocular lenses are about to be approved. (1) Revenue and trends other than the medical and aesthetic sector: The company achieved revenue of 4.52, 2.33, and 69 million yuan respectively in the first half of 2024. Ophthalmology and surgery decreased 6.02% and 2.49% year on year, respectively, and orthopedics remained the same, with a slight increase of 0.42% year on year. However, the decline in ophthalmology revenue is mainly due to the reduction in collection prices in 2023, and in 2024, as collection volume implementation progresses, revenue will be implemented in exchange for price. (2) R&D and momentum: R&D expenses in the first half of the year were 0.125 billion yuan, up 23.68% year on year, and R&D investment continued to grow. The company has opened up the entire industry chain layout of upstream raw materials, hydrophilic and hydrophobic artificial lens products, and downstream sales channels through its subsidiaries Contamac in the UK, Aaren in the US, and Samex. Innovative varieties such as hydrophobic modeled astigmatism, multifocus, trifocal, and hydrophilic continuous vision artificial lenses under development are worth looking forward to.

Profit Forecasts, Valuations, and Ratings

Considering the volume of the country's artificial crystal collection in 2023 after the price reduction, we lowered the company's 2024/25 revenue by 5.94%/6.28% to 3.2/3.85 billion yuan, estimated 2026 revenue of 4.52 billion yuan; reduced net profit to mother by 6.7%/5.88% to 0.515/0.635 billion yuan, and estimated net profit to mother of 0.767 billion yuan in 2026. Maintain a “buy” rating.

Risk warning

Risks related to medical policies, market competition risks, and new product promotion falling short of expectations.