Incident: The company released its 2024 semi-annual report. During the reporting period, it achieved operating income of 10.545 billion yuan, a year-on-year increase of 19.71%; realized net profit to mother of 2.05 billion yuan, an increase of 19.71% over the previous year; and realized deducted non-net profit of 1.785 billion yuan, an increase of 1.48% over the previous year.

Performance was in line with expectations, and operations remained resilient. In the second quarter, the company achieved revenue of 5.349 billion yuan, a year-on-year increase of 2.

25%; realized net profit of 1.15 billion yuan, a year-on-year increase of 23.53%; realized deduction of non-net profit of 0.942 billion yuan, a year-on-year decrease of 6.42%; performance was basically in line with market expectations. Operating cash flow in the first half of the year was 2.843 billion yuan, a year-on-year decrease of 15.61%, and cash flow was slightly under pressure.

The scale of diagnosis and treatment is growing steadily, and the growth rate of various business segments has slowed down due to the macroeconomic environment. 2024H1 achieved 7.9407 million outpatient visits (+9.23% YoY); 0.6499 million surgeries (+6.92% YoY). By business segment, refractive revenue was 4.155 billion yuan (YoY +3.2%), gross profit margin 57.19% (YoY -0.53 pp); optometry service revenue 2.371 billion yuan (YoY +3.1%), gross profit margin 55.95% (YoY +0.71pp); Cataract project revenue of 1.735 billion yuan (YoY +3.6%), gross profit margin 37.50% (YoY +0.02pp); current segment revenue of 0.912 billion yuan (YoY +4.8%), The gross profit margin was 40.58% (-0.28pp); the revenue for the upcoming project was 0.72 billion yuan (YoY +5.1%), and the gross profit margin was 30.68% (YoY -0.11pp); revenue from other projects was 0.622 billion yuan (-7.50% YoY), and the gross profit margin was 39.63% (-0.04pp). The growth rate of all business segments has slowed. We expect this is related to the current macroeconomic environment and the tightening of health insurance fee controls. As an industry-leading leader, the company is expected to maintain steady growth throughout the year.

1+N is progressing steadily, speeding up the acquisition of extracorporeal hospitals. The company's regional ophthalmology centers in Shanghai and Aier in Nanning have been completed and completed. Hubei Aier, Anhui Air, Shenyang Air, and Guizhou Air are being built one after another, and Beijing Air Yingzhi is under construction. In the first half of the year, the company completed the acquisition of 52 medical institutions and continued to invest in ophthalmology clinics/clinics to further improve the local county hospital network. As of mid-year, the company had 311 hospitals and 202 outpatient departments.

Profit forecast and investment suggestions: Considering the pressure on the company's consumer ophthalmology business in the current macro environment, we slightly adjusted our profit forecast. We expect the company's 2024-2026 revenue to be 23.049, 26.018, and 29.314 billion yuan (the previous values for 2024-2025 were 25.248 and 30.398 billion yuan, respectively), up 13.2%, 12.9%, and 12.7% year-on-year respectively; net profit to mother is 4.052, 4.865, and 5.734, respectively Billions of yuan (pre-forecast values for 2024-2025 were 4.278 and 5.419 billion yuan, respectively), with year-on-year increases of 20.6%, 20.1%, and 17.9%, respectively; the company's leading position in ophthalmology is stable and its market share is expected to increase further, maintaining a “buy” rating.

Risk warning event: The risk that the integration of the underlying assets does not meet the expected risk, and that the market size of businesses such as cataracts, refraction, and optometry falls short of expectations.