Incidents:

On August 23, 2024, Aier Ophthalmology released its 2024 semi-annual report. The company achieved revenue of 10.545 billion yuan (+2.86%), net profit of 2.05 billion yuan (+19.71%), net profit of 1.785 billion yuan (+1.48%); of these, 24Q2 achieved revenue of 5.349 billion yuan (+2.25%) and net profit due to mother of 1.15 billion yuan (+23.53%), net profit of non-return to mother 0.942 billion yuan (-6.42%)

Comment:

The consumer environment is sluggish and the new hospital continues to acquire, and profitability is under pressure. ① Gross profit ratio: 24H1/24Q2 was 49.44% (-0.02pct) and 50.55% (-0.80pct), respectively; ② period expense ratio: sales expense ratio was 10.62 (+0.40pct) and 11.86% (+0.80pct), respectively, and management expense ratios were 13.52% (+0.58pct) and 13.59% (+0.95pct), respectively. The R&D expense ratio was 1.41% (-0.03pct) and 1.38% (-0.17pct), respectively, and the financial expenses rate was 1.38% (-0.17pct), respectively 0.98% (+0.92pct) and 0.78% (+1.59pct), the total 24H1/24Q2 is 26.54% (+1.87pct) and 27.61% (+3.17pct), respectively, focusing on sales expense ratio trends under intensifying market competition; ③ Profit margins: 24H1 and 24Q2 net interest rates are 20.95% (+2.07pct) and 23.11% (+3.34pct), respectively, net profit margins of 16.92% (-0.23pct) and 17.61% (-1.63pct). The difference is mainly profit and loss from fair value changes related to external funds.

All businesses are developing steadily, and emphasis is placed on the ability to steadily increase market share. ① Refractive project: 24H1 revenue 4.155 billion yuan (+3.16%), gross profit margin of 57.19% (-0.53pct), refractive surgery ASP may return to an upward range after full photoplastic, ICL V5, and next-generation full femtosecond implementation; ② Cataract project: revenue of 1.735 billion yuan (+3.64%), gross profit margin 37.50% (+0.03pct), focusing on ASP and gross eye margin changes in the post-national cataract business; ③ comprehensive changes in ASP and gross eye margin disease Projects: Among them, the front-end project revenue was 0.912 billion yuan (+4.81%), gross profit margin of 40.58% (-0.28pct), post-eye project revenue 0.72 billion yuan (+5.11%), gross profit margin of 30.68% (-0.11pct); ④ Optometry services: revenue 2.371 billion yuan (+3.05%), gross profit margin of 55.95% (+0.71pct), closely tracking the slowdown in the square molding industry, rapid release of defocus lenses, and the business approval logic of low concentration atopin new changes.

Epitaxial expansion continues to advance, and the hierarchical chain continues to improve. As of 24H1, there were 311 hospitals (+55) and 202 optometry centers (+19) in the company. The company continues to promote the construction of a hierarchical chain layout, and the grass-roots network continues to be strengthened; the focus is on the implementation of the “1+8+N” strategy to improve the operating and medical capabilities of the company's leading hospitals, as well as the further expansion logic of optometry centers.

Profit forecast and investment advice: The company is the largest leader in the ophthalmology service market in China. The national layout continues to expand, the business segment is strong, and the brand is far ahead. Considering the latest performance, we expect the company's 2024-2026 revenue to be 21.275/23.857/26.995 billion yuan (original value 236.14/282.87/334.90), corresponding net profit to mother of 3.736/4.286/4.933 billion yuan (original value 41.55/50.86/62.08), and corresponding PE is 24X/21X/18X respectively, giving a “buy” rating.

Risk warning: policy risk, risk of hospital expansion falling short of expectations, and increased risk of industry competition.