Revenue growth was strong in the second quarter, and profit margins in the contact lens business were not stable. In the first half of 2024, the company achieved revenue of 0.686 billion (+68.54%), net profit due to mother 0.208 billion (+27.49%), and net profit not attributable to mother of 0.199 billion (+29.95%). In the second quarter, revenue of 0.375 billion (+72.91%) was achieved, increasing 20.91% month-on-month. It was the sixth consecutive quarter of month-on-month growth. The revenue for the single quarter reached the highest level in history, with net profit of 0.105 billion yuan (+24.01%) to mother, net profit of 0.1 billion yuan (+28.26%) after deducting net profit from non-return mother. The company's revenue is growing strongly, but the contact lens business is in a period of capacity expansion, various costs are high, and profit margins have not yet reached a steady state, thus affecting the overall net profit growth rate.

The intraocular lens and contact lens business is growing rapidly. Looking at specific businesses, among surgical treatment products, “pronomine” and other series intraocular lenses earned 0.319 billion (+30.20%), benefiting from successful bid collection and selection, and gradual market development of multifocal intraocular lenses, sales continued to grow rapidly. Among myopia prevention and control products, the “Puno Eye” corneal shaping lens revenue was 0.113 billion (+6.89%), and the market growth rate slowed down due to factors such as downgrading consumption and increased competition. Relying on product quality and efficient service, the company achieved higher growth than the industry average; revenue from other myopia prevention and control products was 40.88 million (+64.77%), and the “Puno Eye” and “Xinnuoti” defocus lenses are complementary products. Revenue increased 86.78% year on year, and is progressing at an accelerated stage. Among vision care products, contact lens revenue was 0.183 billion yuan (+957%), accounting for 26.76% of revenue. The company has accumulated rich product and production line experience. Through mergers and acquisitions of Tianyan Pharmaceuticals, Fujian Youyou Kang, and Meiyuedi, the color film production line was in full production. In the first half of the year, Tianyan's revenue was 84.95 million yuan, and net profit was 6.82 million.

Gross profit margin is affected by procurement and product structure, and many major products are in the clinical or registration stage.

The company's gross margin for the first half of 2024 was 69.68% (-13.47pp), mainly affected by the reduction in the price of artificial crystal collection and the increase in the revenue share of contact lens products. Sales expense ratio 15.61% (-2.88pp), management expense ratio 11.26% (-0.02pp), R&D expense ratio 6.88% (-3.34pp); financial expense ratio 1.04% (+0.96pp), net profit margin of 30.34% (-9.77pp). R&D investment in the first half of the year was 68.6 million (+25.43%), accounting for 10% of revenue. Lenticular eye intraocular lenses (PR) have been registered, and aspherical extended depth of field (EDOF) intraocular lenses were registered and accepted in August of this year. Aspheric trifocal astigmatism correction artificial lenses and silicon hydrogel contact lenses are all in clinical condition and are progressing well.

Investment advice: The company is the first domestic manufacturer to independently develop high-end refractive intraocular lenses, and contact lenses are in the rapid release stage. The company has a rich pipeline of research and development, and has great potential for future platformization and international development. Maintaining the profit forecast, net profit for 2024-26 is expected to be 0.409/0.518/0.637 billion, up 34.7%/26.6%/22.8% year on year. The PE corresponding to the current stock price is 36.1/28.5/23.2X, maintaining the “better than the market” rating.

Risk warning: risk of price reduction in collection, increased risk of competition, R&D risk, sales falling short of expectations