Core views:

Puri Ophthalmology released its third quarter report for 2023. The company achieved operating income of 2.116 billion yuan in the first three quarters of 2023, +51.19% year over year; net profit to mother of 317 million yuan, +237.48% year over year; deducted non-net profit of 230 million yuan, +153.75% year over year. Among them, Q3 achieved revenue of 788 million yuan in a single quarter, +45.13% year over year; net profit to mother of 82.42 million yuan, +92.83% year over year; after deducting non-net profit of 81.4 million yuan, an increase of 94.47% year on year.

Performance grew at an accelerated pace, and profitability increased dramatically. The company's performance achieved rapid growth in the first three quarters. We speculate that the main reasons are: (1) the eye disease industry has recovered rapidly since this year, and the backlog of surgical demand has been released centrally during the pandemic; (2) the company's internal medicine hospitals have grown rapidly; (3) the company's national layout has been steadily expanding. According to the company's interim report, three new hospitals, including Shanghai Fengxian Purui, Hubei Purui, and Dongguan **** Ophthalmology, have been opened one after another, injecting new vitality into the company's performance growth.

In addition to revenue growth, the company's profitability also increased dramatically. In the first three quarters of 2023, the company's gross sales margin and deducted non-net interest rate were 45.55% and 10.62% respectively, up 1.10pp and 4.29pp, respectively. The increase in profit margins is mainly due to the scale effect and the gradual maturity of its various nurturing hospitals. At the same time, the company's cost ratio also declined during the period. The company's sales, management, R&D, and financial expense ratios for the first three quarters were -2.59, -2.02, +0.03, and -0.56pp, respectively.

Introduce major ophthalmologists and continue to build an academic highland. According to the company's public investor relations account, in August 2023, Professor Lu Yi, the former director of ophthalmology and doctoral supervisor at the Eye, Ear, Nose and Throat Hospital affiliated to Fudan University, officially joined Puri Ophthalmology and was hired as the Vice President of Puri Ophthalmology and the chief expert in cataract. In recent years, the company has continued to pay attention to the introduction, training and reserve of medical and management talents, and has continuously maintained and enhanced the company's core competitiveness through various talent introduction and training measures.

Profit forecasting and investment advice. The company's revenue for 2023-2025 is estimated to reach 27.65, 35.99, and 4.686 billion yuan, and net profit to mother of 3.01, 3.55, and 492 million yuan, respectively. Considering the steady expansion of the company's business scale and gradual maturity of profitability, the 2023 PS 8X is valued at a reasonable value of 147.83 yuan/share, giving it a “buy” rating.

Risk warning. Chain business model expansion risk, medical accident risk, and health insurance fee control risk.