Key points of investment:

Performance has been growing steadily, and the share of medical and aesthetic medicine continues to rise. The company achieved revenue of 1.404 billion yuan/6.97% year-on-year increase in 2024H1, net profit of 0.235 billion yuan/year-on-year increase of 14.64%, of which 2024Q2 achieved revenue of 0.758 billion yuan/8.10% year-on-year increase, and net profit of 0.138 billion yuan/year-on-year increase of 11.03%. By sector: 1) Medicine and Aesthetics: 24H1 achieved revenue of 0.634 billions/ a year-on-year increase of 25.72%; 2) Ophthalmology: 24H1 achieved 0.452 billion/ year-on-year decrease of 6.02%; 3) Orthopedics: 24H1 achieved revenue of 0.233 billion/ a year-on-year increase of 0.42%; 3) Anti-adhesion and hemostasis: 24H1 achieved 0.069 billion in revenue, down 2.49% year over year.

The hyaluronic acid product portfolio has been recognized by the market and is expected to continue to grow rapidly. 1) Hyaluronic acid: 24H1 achieved revenue of 0.417 billion, a year-on-year increase of 51.3%. “Haiwei”, “Jiaolan”, “Haimei Moon White”, and “Haimei Moonwhite”, which was newly approved in July 2024, created a full-price product portfolio. The company continued to carry out C-side education and doctors' IP development through online channels, and continued to launch rich comprehensive facial rejuvenation solutions offline through a diverse product matrix to continuously strengthen stickiness among brands, institutions and consumers; 2) RF and laser equipment: 24H1 achieved 0.136 The billion revenue, which fell 11.54% year on year, is mainly due to the State Drug Administration upgrading the regulatory category of radiofrequency treatment equipment products from Class II to Class III medical devices, and in July 2024, the period of this policy was extended to April 1, 2026, which is expected to have a positive effect on the recovery in sales of the company's RF and laser equipment.

The ophthalmology product line is rich, and the localization process is accelerating. 1) Cataract product line: 24H1 achieved revenue of 0.232 billion, down 10.70% year on year. Among them, artificial lenses were affected by national procurement, revenue 0.181 billion/down 10.84% year on year; 2) Myopia prevention and refractive correction: 24H1 achieved revenue 0.201 billion/2.44% year over year. Among them, the optometry materials business was affected by the cyclical preparation of downstream manufacturers, and the revenue of optometry terminal products decreased by 2.60% year on year. 0.094 billion/2.26% year-on-year decline, mainly due to weak consumption of corneal reshaping lenses, increased competition for approval of new products, and the diversion of functional frame mirrors. However, the company's “MyOK” and “Children's Entertainment” are highly competitive, and prescription tablets increased by 48.6% and 189.9% year over year.

Profit forecasting and investment advice

Considering that the company's ophthalmology business is affected by policies and the consumption environment, we lowered our profit forecast. The company has a rich product matrix in the ophthalmology and medical aesthetic sector, benefiting from the localization of ophthalmology and high medical and aesthetic growth in the long term. The company's 24-26 revenue is expected to be 2.903/3.392/4.042 billion yuan (previous forecast for 24-25 years was 3.266/3.938 billion yuan), and net profit to mother was 0.508/0.638/0.779 billion yuan (previous value 24-25) The annual forecast is 0.577/0.668 billion yuan), and the corresponding PE is 28/22/18X, maintaining a “buy” rating.

Risk warning

Market competition intensifies; product development and launch progress falls short of expectations; risk of medical malpractice in the market; risk of unstable supply of agent products.