The company's recent situation

Deshijia released business data for 3Q24: The total number of ophthalmic surgeries in the company was about 6,445, -7.8% compared with the same period last year.

reviews

3Q24 operating data is under pressure in the short term, and share repurchases have boosted confidence. In the short term, the company completed a total of 6,445 eye surgeries in 3Q24, or -7.8% year-on-year, mainly due to a decline in spending intentions due to the declining macroeconomic environment in China and Europe. The company believes that a flexible business model can help it return to its original trajectory in the short term, but remains cautious about the results for the remaining months of 2024. In the long run, demand for refractive surgery and presbyopia continues to increase, and the trend is basically positive. At the same time, the company pays attention to shareholder returns, actively and continuously promotes share repurchases and dividends, and continuously enhances market confidence.

Presbyopia surgeries are growing steadily, and overseas regions are showing impressive results. Under the macroeconomic downturn, the company believes that crystal replacement surgery is the ideal treatment for presbyopia, and the company believes it can withstand the impact of the macroeconomy.

1H24's crystal replacement surgery revenue bucked the year-on-year trend +12.0% to a new high of HK$0.199 billion, showing business resilience. By region: 1) China: The company 1H24's revenue was +3.9% YoY, and the revenue from crystal replacement surgery was +27.9% YoY. We believe that with the continuous implementation of the Chinese government's economic incentive policies, the company has plenty of room for future growth. 2) Germany: The company's 1H24 revenue was +9.9%, and revenue from crystal replacement surgery and ICL implant surgery was +14.9% and 10.7%, respectively. The company believes that as consumer confidence among the younger generation recovers, it will release more market space. 3) United Kingdom: The company's 1H24 revenue was +21.1% year-on-year, thanks to the rapid expansion of new flagship clinics in London, and the performance was outstanding.

“New start-up+mergers and acquisitions” promote the common development of endogenous and extrinsic development. 1) Opening new clinics is getting better: In the short term, the company is under a lot of pressure to open new clinics, and we expect this year to drag down profits significantly; in the long run, the company's new clinics in mainland China are on the right track, and the performance is gradually approaching German clinics; the two flagship clinics opened in London and Hong Kong, China will enter a harvest period, and the company is expected to reach break-even by the end of 2024; the company plans to open a new clinic in Kiel, Germany by the end of 2024; the company plans to open a new clinic in Kiel, Germany by the end of 2024 home The store also opened satellite clinics in Beijing and Shanghai to increase the utilization rate of surgical centers. 2) The pace of mergers and acquisitions continues, focusing on high-quality targets: the company quickly implements mergers and acquisitions strategies to find famous ophthalmology clinics in Europe and Asia (except mainland China). At the same time, we actively pay attention to opportunities to find high-quality American standards and expand our business footprint.

Profit forecasting and valuation

Considering the impact of macroeconomics on spending intentions and the impact of opening new clinics on the profit side, we lowered the company's 2024 net profit forecast by 54.1% to HK$0.092 billion, and first introduced the company's 2025 revenue/net profit forecast of HK$0.798 billion/ HK$0.111 billion. The current stock price corresponds to 15.3/12.8xp/E for 24-25. Taking into account the reduction in profit forecasts and the recent upward shift in the sector's overall valuation center, we maintained an outperforming industry rating and lowered our target price by 23.7% to HK$5.8, corresponding to 17.3x P/E in 2025 (valuation switched to 25 years), with 35.8% upside compared to the current stock price.

risks

The impact of the economic environment on consumer intentions; the rise in new clinics falls short of expectations; the risk of medical emergencies.