Key points of investment:

The 2024H1 performance was in line with expectations: the company released its 2024 semi-annual report. In the first half of the year, the company achieved operating income of 0.686 billion yuan, an increase of 69% over the previous year; achieved net profit due to mother of 0.208 billion yuan, an increase of 28% over the previous year; realized net profit after deducting non-return to mother of 0.199 billion yuan, an increase of 30% over the previous year. The company's first half results were in line with expectations.

Cataract crystals are growing rapidly, and contact lenses are being released as scheduled: by product, benefiting from good procurement and selection, and continuous improvement in product competitiveness, the company's revenue from “prognomine” and other artificial lenses increased 30.20% year on year; contact lens revenue was 0.183 billion yuan, up 956.9% year on year. Currently, the color film production line is in full production, and the company is continuing to improve production line efficiency; among myopia prevention and control products, the revenue of “Puno eye” corneal shaping lenses increased 6.9% year on year, “Puno eye” and “Shinnoeye” off lens revenue increased 6.9% year on year The year-on-year increase was 86.8%.

Changes in revenue structure, decline in the company's gross margin and expense ratio: The company's gross margin fell to 69.68% in the first half of the year (83.15% in the same period last year) due to the decline in the price of artificial lenses after collection and the increase in the share of revenue from contact lens products. Expense rates have also all declined. In the first half of the year, the company's sales expenses ratio was 15.61% (18.49% in the same period last year); the management expenses ratio was 11.26% (11.28% in the same period last year); and the R&D expenses ratio was 6.88% (10.22% in the same period last year).

Ongoing research projects continued to advance: the company invested a total of 68.6 million yuan in R&D in the first half of the year, an increase of 25.43% over the previous year. Among them, lens eye intraocular lenses (PR) have been registered, and clinical projects such as aspheric trifocal astigmatism correction artificial lenses, aspherical extended depth of field (eDOF) artificial lenses, and contact lenses have accelerated and are progressing well.

Maintaining a “buy” rating: The company's intraocular lenses maintain a high growth trend, contact lenses are being released rapidly, and the OK mirror industry is under pressure, but the company continues to grow. Considering the growth pressure of the OK mirror industry, we slightly lowered the company's profit forecast for 2024-2026. The estimated net profit to mother is 0.395 billion yuan, 0.508 billion yuan, and 629 million yuan respectively (the previous forecast was 0.401 billion yuan, 0.526 billion yuan, and 0.646 billion yuan). We have long been optimistic about the ophthalmology consumables circuit and the company's innovation-driven growth capacity, and maintain a “buy” rating.

Risk warning: increased market competition, R&D risks, and procurement price reduction risks