Incident: The company announced 2024 interim results: 24H1 achieved operating income of 10.545 billion yuan, up 2.86% year on year; net profit before mother was 2.05 billion yuan, up 19.71% year on year; net profit after deducting non-return to mother was 1.785 billion yuan, up 1.48% year on year. Among non-recurring profit and loss, income and loss from changes in the fair value of financial assets and financial liabilities was 0.255 billion yuan. The results were slightly lower than market expectations.

Comment:

The external environment affects the company's short-term revenue growth rate and is optimistic about the company's long-term development: 24Q2 achieved operating income of 5.349 billion yuan in a single quarter, an increase of 2.25% over the previous year, and achieved net profit of 1.15 billion yuan to mother, an increase of 23.53% over the previous year.

Revenue for the second quarter was slightly lower than market expectations. Affected by weak social consumption, the revenue growth rate of the ophthalmology consumer business was weak. The company is a leader in the ophthalmology industry, and demand in the medical industry is rigid. As the economy gradually recovers in the future, domestic demand continues to rise, and demand in the ophthalmology industry will also rise rapidly. We are optimistic about the company's long-term development.

The growth rate of business revenue in various sectors was under pressure in the short term: in the first half of '24, the company achieved 7.9407 million outpatient visits, +9.23%; the number of surgeries was 0.6499 million, +6.92% year-on-year; 24H1's gross profit margin was 49.44%, a year-on-year decrease of 0.02pct, which was basically the same. 24H1 refractive business revenue reached 4.155 billion yuan, up 3.16% year on year, gross profit margin was 57.19%, year on year decrease of 0.53 pct; 24H1's optometry business revenue was 2.371 billion yuan, up 3.05% year on year, and gross margin was 55.95%, up 0.71 pct year on year; the immediate project achieved revenue of 0.912 billion yuan, up 4.81% year on year; cataract The project achieved revenue of 1.735 billion yuan, an increase of 3.64% year over year.

The “1+8+N” and international strategic layout continues to advance, strengthening the leading advantages at home and abroad: the company continues to enhance the breadth, depth, density and height of the national medical network, and has gradually built a hierarchical diagnosis and treatment network with multiple hospitals and optometry clinics (clinics) in the provincial capital city in the same city. As of 2024H1, the company has a total of 311 hospitals and 202 outpatient departments in China. The advantages of hierarchical chains and scale effects have been further demonstrated. It has deployed 140 ophthalmology centers and clinics overseas, and is in a leading position in the domestic industry. With the steady growth of the company's flagship old hospital, the performance of the second new hospital climbed, and the continuous integration of high-quality hospitals incubated within the group, the company continued to grow steadily and stabilize its leading position in the country.

Profit forecast, valuation and rating: Taking into account factors such as external environmental impact and company expenses, we lowered 24-25 net profit to mother to 3.992/4.612 billion yuan (original forecast 4.214/5.524 billion yuan, the reduction was 5.3%/16.5%), and the net profit forecast for the additional 26 years was 5.47 billion yuan. The company is a leading ophthalmology hospital. The company is a leading ophthalmology hospital. Refractive, optometry and various businesses still have potential to grow and maintain a “buy” rating.

Risk warning: risk of weak consumption in the external environment; integration of mergers and acquisitions projects falling short of expectations; health insurance policy risks.