The company's revenue and profit growth rate has slowed slightly, and we are optimistic about long-term performance. The company achieved revenue of 16.302 billion yuan (YoY +1.58%), net profit to mother of 3.452 billion yuan (YoY +8.50%), net profit of 3.113 billion yuan (YoY +0.26%) in 2024Q1-Q3. The overall revenue and profit growth rate of the company slowed slightly. 2024Q1-Q3 gross sales margin and net margin were 51.02% (-0.91pct) and 22.50% (+0.56pct), respectively. The high gross margin refractive light business is expected to account for a slight decline in revenue. The management expense ratio, sales expense ratio, and financial expense ratio are 13.65% (+0.66pct), 10.06% (+0.05pct), and 0.86% (+0.46pct), respectively. Financial expenses have increased, mainly due to increased rental interest expenses and exchange rate fluctuations caused by mergers and acquisitions of hospitals, but Overall profitability remains steady. Looking at a single quarter, 2024Q3 achieved revenue of 5.756 billion yuan (yoy -0.68%), net profit of 1.402 billion yuan (yoy -4.56%), net profit of 1.328 billion yuan (yoy -1.34%), gross sales margin and net interest rate of 53.91% (-2.4pct) and 25.36% (-2.0pct), respectively. The management expense ratio, sales expense ratio, and financial expense ratio were 13.89% (+0.81pct), respectively. 9.03% (-0.62pct) and 0.64% (-0.35pct). With the expected improvement in the consumer environment, business areas such as refraction and optometry are expected to recover, and we are optimistic about the company's long-term performance.

Actively promote the “1+8+N” strategy, continue to improve the hierarchical chain model, and achieve in-depth expansion of the medical service network. The Group is actively implementing the “1+8+N” strategy. Currently, nine flagship hospitals have basically been built and put into operation. The medical service network continues to expand. On July 29, 2024, the group further deepened its leading position in the “hierarchical chain” system across the country through the strategic acquisition of shares in 35 hospitals including Humen Air and Yuncheng Air. In 2022, 35 hospitals achieved total revenue of 0.554 billion yuan and realized net profit of -70.06 million yuan; in 2023, total revenue of 0.749 billion yuan (+35.31%) and achieved net profit of 18.6 million yuan, which has the potential to become a driving factor for the company's future growth. In 2024Q1-Q3, fixed assets increased by 31.85%, and projects under construction declined by 39.24%, mainly due to new mergers and acquisitions and the opening and consolidation of subsidiaries in Anhui and Guizhou. The company adheres to the “innovation-driven, technology-driven” development strategy and promotes the collaborative development of medical education and research through the construction of an integrated medical education and research innovation platform for multiple hospitals, institutes, stations and centers. On December 12, 2023, the world's first “full photoplastic” personalized refractive correction surgery was performed at Guangzhou Aier Eye Hospital. Clinical data showed that 3 months after full photoplasty, 98.1% of patients had visual acuity of 1.0 or above, and some patients had eyesight exceeding the best vision correction before surgery.

The company actively promotes its overseas market expansion strategy and continuously optimizes and improves its global business layout. As of June 30, 2024, the company has deployed 140 ophthalmology centers and clinics around the world, and has achieved a basic global layout in Europe, Southeast Asia, the United States, etc., forming a medical service network covering the world. The further acquisition of the British Optimax Group this year further strengthened its position in the global ophthalmology market.

Profit forecast: We expect the company's 2024-2026 revenue to be 20.823, 23.238, and 26.113 billion yuan, respectively, with year-on-year growth rates of 2.24%, 11.60%, and 12.37%, respectively, and net profit to mother of 3.635, 4.135, and 4.823 billion yuan, respectively. The year-on-year growth rates are 8.21%, 13.76%, and 16.64%, respectively. Corresponding to the current stock price PE is 38.21, 33.59 and 28.80 times, respectively, maintaining the “recommended” rating.

Risk warning: the risk of increased market competition and changes in the macro environment, the risk of major medical disputes and accidents, the risk of management and expansion falling short of expectations, other systemic risks, etc.