The company achieved revenue/net profit of 3.182/0.421 billion yuan (yoy +2.6%/-24.5%) in 1-3Q24, of which 3Q24 achieved revenue/net profit of 1.131/0.155 billion yuan (yoy +2.0%/-23.4%). Under the influence of external consumer environment factors, the company's 3Q24 revenue maintained steady growth; the company's 3Q24 profit side declined. We speculate that personnel and equipment investment increased in the short term due to the company's long-term development. The company has excellent diagnostic and treatment technology and a steady expansion of the service network. We expect the subsequent recovery of the consumer environment to drive the company's performance to accelerate development. Maintain “buy-in.”

Consumer ophthalmology business leads overall revenue growth

1) Consumer ophthalmology: We estimate that 1-3Q24's revenue from refractive and optometry projects will grow steadily. Considering that the company's refractive diagnosis and treatment technology strength is leading in the industry and the continuous expansion of optometry diagnosis and treatment programs, and the further improvement of the company's service network layout, we are optimistic that the revenue of the sector will improve throughout the year. 2) Cataract and posterior ocular programs: We estimate that revenue from 1-3Q24 cataract and posterior ocular programs may have declined slightly, mainly due to the high base in the context of rapid recovery from diagnosis and treatment related to the 1-3Q23 epidemic. Considering that the demand for diagnosis and treatment of cataracts and complex eye diseases is quite rigid, we are optimistic about the long-term trend of the company's cataract and posterior ocular programs.

Actively integrate extracorporeal ophthalmology hospitals and expand the service network in an orderly manner

The company continues to advance the “endogenous growth+epitaxial merger and acquisition” two-wheel drive strategy. As of 1H24, the company has 61 ophthalmology specialty hospitals and 65 optometry centers in China (57 and 60 at the bottom of 23, respectively), and the service network has been steadily expanding. According to the company's announcement, from 3Q23 to 1H24, the company has successively completed acquisitions of hospitals such as Hefei Shining, Chengdu Eddy, Suining Fuxing, and Weishan Medical University; we speculate that the relevant hospitals have now basically completed internal integration of the Group's supply chain, effectively reducing operating costs and beginning to contribute to increased performance. We are optimistic that the company will further strengthen the layout of its hospitals and optometry centers in the future to achieve medium- to long-term positive development.

Increase sales investment and strengthen brand influence

The company's gross margin for 1-3Q24 was 46.0% (yoy-4.6pct). We speculate that the share of revenue from other businesses with relatively low gross margins has increased mainly due to artificial crystal collection and implementation. The company's 1-3Q24 sales/management/R&D expenses rate was 14.2%/11.6%/1.7%, yoy+1.3/+0.8/-0.3pct, respectively. The company continues to strengthen its investment in brand promotion and sales promotion, and consolidate its brand influence.

Profit forecasting and valuation

Based on the company's 1-3Q24 business situation, we lowered our revenue growth rate and gross margin forecast. The estimated EPS for 24-26 will be 0.63/0.73/0.84 yuan (previous value of 0.71/0.84/0.96 yuan). The company's business was comprehensive and the service network expanded in an orderly manner. The company was given 37x PE in 25 years (the average expected average value of the comparable company Wind was 31x), corresponding to a target price of 27.03 yuan (previous value 22.15 yuan, mainly considering the increase in the average PE value of the comparable company), maintaining a “buy” rating.

Risk warning: Increased market competition, medical accidents and disputes, management risks of continued expansion.