Summary of Medical Services Industry Conference Call Industry Overview - The medical services industry experienced a slight revenue increase of 0.2% to 36 billion in the first half of 2024, with a decline in the second quarter due to high base effects from the previous year [1][2] - Consumer medical services, particularly in ophthalmology, showed resilience, while serious medical service companies faced a revenue decline of 15%-20% due to high base effects and DRG/DIP consulting fees [1][4] Key Insights and Arguments - **Ophthalmology Sector Performance**: - Aier Eye Hospital's refractive and optical businesses achieved double-digit growth, leading the industry [1][5] - Other companies in the cataract business experienced declines due to the impact of crystal procurement, but a recovery is expected in the second half of the year [1][5] - The price war in refractive services is diminishing, and the demand for optical services is expected to rise due to the conclusion of the youth myopia prevention plan [1][5][8] - **Medicare Policy Impact**: - From January to July, the Medicare fund showed stable income growth of 7% and a spending decrease of 1%, indicating pressure on the expenditure side [9] - Data from cities like Chongqing, Tianjin, and Guangxi suggest steady outpatient visits, with expectations for recovery in demand and reporting in the second half of the year [9] - **Aier Eye Hospital's Strategic Expansion**: - The company aims to increase its overseas market share from the current 10-15% to 30-50% [1][10] - New business opportunities include advanced refractive procedures, multi-focus cataract upgrades, and presbyopia surgeries, with AI technology expected to enhance operational efficiency [1][10] Company-Specific Performance - **Aier Eye Hospital**: - Reported a 9% revenue growth and a 14% increase in net profit excluding non-recurring items in the first half of 2024 [3][8] - The average selling price (ASP) in refractive services increased by approximately 5% [5][8] - **International Medical**: - Faced operational pressure with a 16% revenue decline but managed to reduce net profit loss by 15% through improved diagnostic efficiency and optimized inpatient services [3][11] - The proton center is set to commence operations, and the aesthetic medical business is expected to grow significantly [11] Future Development Expectations - The second half of 2024 is anticipated to show optimistic trends for the medical services industry, with potential stock price opportunities due to accelerated company performance [3][12] - Policy changes, such as the introduction of provincial payment details and the expansion of prepayment and real-time settlement, are expected to positively impact the industry [12][13] - The overall beta slope of the industry is expected to improve, indicating a recovery in company performance and elasticity [13]

Core Insights - The conference held in Hangzhou focused on the integration of artificial intelligence (AI) in ophthalmology, highlighting the need for innovative solutions to address the challenges in eye health services [1][2] - The release of the "Aier Eye Care AI Strategic White Paper" marks a significant step in outlining the strategic vision for AI's role in transforming eye health services [9][11] Industry Challenges - The eye health sector in China faces dual pressures: an aging population leading to increased prevalence of eye diseases and a rising rate of myopia among youth, coupled with a significant shortage of ophthalmologists [1][2] AI Integration in Eye Health - AI technology is identified as a key driver for overcoming resource limitations, enhancing service efficiency, and enabling early detection and treatment of eye diseases [2][5] - Aier Eye Care has developed a comprehensive "five-in-one" AI smart hospital system covering the entire cycle of eye health services, from prevention to rehabilitation [5][12] Technological Advancements - The "ADP3.0 Intelligent Medical AI Platform" has been introduced, featuring capabilities for data governance, model training, and clinical validation, enhancing diagnostic accuracy and operational efficiency [8][11] - Aier Eye Care has established partnerships with institutions like the Chinese Academy of Sciences to advance research in imaging-assisted diagnosis and intelligent equipment [11][12] Ecosystem Development - The strategic white paper outlines a vision for building an "eye health ecosystem" through collaboration with various stakeholders, including medical device manufacturers, pharmaceutical companies, and research institutions [9][11] - Aier Eye Care's initiatives have led to the establishment of a robust clinical database and the recognition of its data governance practices as industry benchmarks [11][12]

Investment Rating - The report maintains a "Market Weight" rating for the pharmaceutical and biotechnology industry [6][29]. Core Insights - The SW pharmaceutical and biotechnology industry underperformed the CSI 300 index, declining by 1.27% from August 22 to September 4, 2025, which is approximately 3.07 percentage points lower than the index [13][29]. - Most sub-sectors within the industry recorded negative returns during the same period, with the medical research outsourcing and chemical preparation sectors showing the highest gains of 12.17% and 5.45%, respectively. In contrast, the in vitro diagnostics and raw materials sectors experienced declines of 5.96% and 4.95% [16][19]. - Approximately 22% of stocks in the industry recorded positive returns, while around 78% experienced negative returns during the reporting period [17][19]. - The overall price-to-earnings (PE) ratio for the SW pharmaceutical and biotechnology industry was approximately 55.41 times, with a relative PE ratio of 4.23 times compared to the CSI 300 index, indicating little change in industry valuation [20][29]. Summary by Sections 1. Market Review - The SW pharmaceutical and biotechnology industry underperformed the CSI 300 index, with a decline of 1.27% from August 22 to September 4, 2025 [13]. - Most sub-sectors recorded negative returns, with medical research outsourcing and chemical preparations leading in gains [16]. - About 22% of stocks in the industry had positive returns, while 78% had negative returns [17]. 2. Industry News - The National Healthcare Security Administration announced the list of drugs for the 2025 National Basic Medical Insurance, with 718 submissions and 535 passing the initial review [27]. - The report highlights the upcoming national medical insurance negotiations and the analysis of 25 traditional Chinese medicine products [27]. 3. Company Announcements - Guangzhou Baiyunshan Pharmaceutical Group announced that its subsidiary received approval for a drug to pass the consistency evaluation for generic drugs [28]. 4. Industry Outlook - The report suggests focusing on investment opportunities in the innovative drug sector and related areas, including medical devices and traditional Chinese medicine [29][32].

Group 1 - The core viewpoint of the news is that Aier Eye Hospital's subsidiary has received preliminary approval for an environmental impact assessment for its expansion project, with a total investment of 20 million yuan [1] - The "A-share Green Report" project aims to enhance transparency in environmental information of listed companies, utilizing authoritative environmental regulatory data from 31 provinces and 337 cities [1] - The latest A-share Green Weekly Report indicated that six listed companies recently exposed environmental risks [1] Group 2 - Aier Eye Hospital's main business is in the medical industry, contributing 99.65% to its revenue, while other businesses account for 0.35% [3] - The company's market capitalization is approximately 117.97 billion yuan, with projected revenues of 203.67 million yuan for 2023, 209.83 million yuan for 2024, and 115.07 million yuan for the first half of 2025 [4] - The net profit attributable to the parent company is expected to be 33.59 million yuan in 2023, 35.56 million yuan in 2024, and 20.51 million yuan in the first half of 2025 [4]

Summary of Key Points from the Conference Call Industry Overview - **Industry**: Healthcare Services in China - **Period**: 1H25 - **Context**: The industry is facing rising pricing pressure due to the deepening DRG/DIP 2.0 reform, leading to soft results across hospital operators in China [1][7][25]. Core Insights - **Financial Performance**: - Most hospitals reported robust operating cash flow (OCF) and have become more prudent in managing operating cash flow (OCF), free cash flow (FCF), and expansion plans while prioritizing shareholder returns [1][7]. - Hospitals exposed to public insurance settlements faced severe pricing pressure across various therapeutic areas, including cataract, oncology, IVF, and traditional Chinese medicine (TCM) [7][25]. - **Management Outlook**: - Management comments indicate an earnings bottom in 1H25, with expectations for a more manageable base from 2H25, although the pace of recovery remains uncertain [7][25]. - Companies are focusing on improving efficiency and managing costs, with some reporting significant improvements in cash flow metrics [7][25]. Company-Specific Highlights Aier Eye Hospital Group (300015.SZ) - **Performance**: - 2Q revenue growth of 2.5% YoY, operating profit growth of 7.7% YoY, and recurring profit growth of 4% YoY, although below expectations [9]. - Overseas revenue growth was 16.5% YoY, contributing 13% to group revenue, with a long-term target of 30-50% [9]. Gushengtang Holdings Ltd (2273.HK) - **Performance**: - 1H25 revenue increased by 9.5% YoY, but adjusted net profit was below expectations [9][12]. - Cash flow improved significantly, with OCF up 111% YoY and FCF up 466% YoY [12][14]. - The company lowered its 2025 revenue guidance to 10-15% growth, expecting 30%+ net profit growth in 2025 [12][15]. Hygeia Healthcare Holdings Co., Ltd. (6078.HK) - **Performance**: - Reported a 16.5% YoY decline in revenue, with adjusted net profit down 34.5% YoY [25][26]. - OCF improved by 29.9% YoY, indicating better cash flow management despite revenue pressures [25][26]. - The company expects notable improvements in FCF to support debt repayment and potential expansions via M&A [25][28]. Jinxin Fertility Group Ltd (1951.HK) - **Performance**: - 1H25 total revenue declined by 10.7% YoY, with adjusted net profit down 68.3% YoY due to impairment provisions [38][39]. - The company plans to maintain a dividend payout of no less than 50% and aims for gradual recovery in profitability by 2026 [41][43]. Additional Insights - **Market Dynamics**: - The healthcare sector is experiencing a shift towards more prudent expansion strategies amid regulatory and macroeconomic uncertainties [12][17][25]. - Companies are increasingly focusing on shareholder returns, with commitments to dividends and share buybacks [14][28][41]. - **Technological Integration**: - Gushengtang is exploring AI applications to enhance service efficiency, with initial contributions expected in the tens of millions RMB for 2025 [18][19]. - **Regulatory Challenges**: - The DRG/DIP 2.0 reform continues to exert pressure on pricing and reimbursement, impacting overall profitability across the sector [7][25][30]. Conclusion The healthcare services industry in China is navigating significant challenges due to regulatory reforms and pricing pressures. However, companies are adapting by focusing on cash flow management, prudent expansion, and shareholder returns, with some signs of recovery anticipated in the latter half of 2025.

Investment Rating - The investment rating for the company is "Buy" (maintained) [1] Core Views - The company has demonstrated steady growth in performance, driven by technological upgrades in its core business [5] - For the first half of 2025, the company achieved a non-net profit growth of 14.30%, indicating strong operational resilience in its core business [5] - The company is advancing its "AI + Ophthalmology" application layout and has initiated the development of an "AI Ophthalmologist" intelligent system [6][7] Financial Performance - In the first half of 2025, the company reported total revenue of 11.507 billion yuan, a year-on-year increase of 9.12%, and a net profit attributable to shareholders of 2.051 billion yuan, a slight increase of 0.05% [4] - The company achieved a revenue of 5.481 billion yuan in Q2 2025, reflecting a growth of 2.47%, while the net profit attributable to shareholders decreased by 12.97% to 1.001 billion yuan [4] - The revenue structure shows significant contributions from various core business segments, with refractive projects generating 4.618 billion yuan (up 11.14%) and optical services generating 2.720 billion yuan (up 14.73%) [5][6] Future Projections - The company is expected to achieve revenues of 23.239 billion yuan, 26.066 billion yuan, and 29.454 billion yuan for the years 2025, 2026, and 2027, respectively, with year-on-year growth rates of 10.8%, 12.2%, and 13.0% [8] - The projected net profit attributable to shareholders for the same years is 4.030 billion yuan, 4.633 billion yuan, and 5.352 billion yuan, with growth rates of 13.3%, 15.0%, and 15.5% [8] Operational Expansion - As of June 30, 2025, the company operates 355 hospitals and 240 outpatient departments domestically, with ongoing key hospital projects in cities like Beijing [6] - The company has expanded its international presence to 169 ophthalmology centers and clinics, enhancing its global resource integration capabilities [7]

Core Viewpoint - Long-term institutional investors are revealing their positions amidst short-term market fluctuations, indicating a deeper judgment on future market trends by renowned fund managers like Zhang Kun and Ge Lan [2][18]. Group 1: Zhang Kun's Portfolio Adjustments - Zhang Kun's management of the E Fund Blue Chip Select has seen a slight reduction in stock positions, with the stock holding ratio decreasing from 94.14% to 92.63%, marking the lowest level in nearly three years [3]. - The fund's top ten holdings now account for 83.84% of its net value, the highest in the past ten quarters, while the "invisible heavyweights" (ranked 11th to 20th) have significantly decreased from 18.05% to 9.22% [3][4]. - Notable adjustments include a reduction in holdings of Meituan-W by 46.43% and an increase in holdings of Fenzhong Media from 1.53 million shares to 2.48 million shares [4][5]. Group 2: Ge Lan's Focus on Innovative Pharmaceuticals - Ge Lan's management of the China Europe Fund has seen a significant increase in the number of holdings in innovative pharmaceuticals, with the top ten holdings including new entries like Xinli Tai and Bai Li Tian Heng [10][12]. - The fund's turnover rate reached 61.3%, indicating a dynamic adjustment strategy, with a notable increase in the number of innovative drug stocks in the top twenty holdings [10][12]. - Ge Lan emphasizes that the pharmaceutical sector will continue to grow driven by innovation, consumer recovery, and domestic substitution, with a focus on the innovative drug industry chain and consumer healthcare [19][20]. Group 3: Market Sentiment and Future Outlook - Zhang Kun challenges the prevailing pessimistic view on domestic demand, arguing that consumer confidence is influenced by expectations rather than just current economic conditions [18][19]. - Ge Lan anticipates that the pharmaceutical industry will rely on innovation breakthroughs and consumer recovery for growth, despite potential risks from global economic fluctuations [19][20].

事项： 毛利率及净利率下降，销售费用率进一步下降。利润率方面，2025H1毛利率48.56%，同比下降 0.88pp，净利率19.29%，同比下降1.66pp。费用率方面，销售费用率9.15%，同比下降1.47pp，管理费用 率13.55%，同比提升0.03pp，财务费用率0.42%，同比下降0.56pp。 维持"推荐"评级。考虑DRG全面推行、人工晶体集采政策落地，调整2025-2027年盈利预测为净利润 37.21、43.25、51.02亿元（原预测2025-2027净利润41.39、50.07、59.91亿元）。宏观政策加大对经济刺 激力度，未来经济有望修复，消费医疗赛道业绩有望修复，公司为赛道头部公司经营具备韧性，维 持"推荐"评级。 风险提示：经营不及预期；政策风险；医疗事故风险等。 公司发布2025年中报，收入实现115.07亿元，同比增长9.12%，归母净利润20.51 亿元， 同比增长0.05% ， 扣非归母净利润20.40 亿元， 同比增长14.30%。单Q2收入54.81亿元，同比增长2.47%，归母净利润 10.01亿元，同比下降12.97%，扣非归母净利润9.80亿元，同比增长4.03 ...

Core Viewpoint - The refractive surgery business, a significant revenue source for private ophthalmology institutions, has experienced a slowdown in growth in recent years [3]. Group 1: Revenue Growth Analysis - Among five listed ophthalmology companies in A-shares, three reported single-digit or less revenue growth in their refractive projects for the first half of the year. Specifically, Purui Eye Hospital (301239.SZ) saw a 4.13% increase to 720 million yuan, accounting for 49% of its total revenue; He’s Eye Hospital (301103.SZ) reported a 3.26% increase to 135 million yuan, making up 24% of its revenue; and Guangzheng Eye Hospital (002524.SZ) had a mere 0.32% growth to 142 million yuan, representing 32.71% of its revenue [4]. - In contrast, Aier Eye Hospital (300015.SZ) and Huaxia Eye Hospital (301267.SZ) maintained double-digit growth rates of 11.4% and 13.75%, respectively [4]. Group 2: Market Dynamics and Competition - The refractive surgery market is highly competitive, prompting ophthalmology companies to leverage new technologies for differentiation [6]. - Aier Eye Hospital attributed its revenue growth to the acceptance of new surgical techniques such as All-Laser LASIK and the expansion of its medical network, which increased patient coverage [8]. - Purui Eye Hospital is also focusing on introducing authoritative expert teams and upgrading high-end diagnostic equipment to cultivate new growth points [8]. Group 3: Consumer Demand and Market Potential - The current demographic for refractive surgery includes two main groups: those with essential needs due to academic or professional requirements and those seeking aesthetic improvements by eliminating glasses or contact lenses [8]. - Despite the stable demand from the essential needs group, macroeconomic factors have lengthened the decision-making cycle for non-essential consumers [8]. - There remains significant unmet demand in the refractive surgery market, with approximately 700 million people suffering from myopia in China, yet only about 1 million undergoing surgery annually, indicating substantial growth potential [8]. Group 4: Technological Innovations - Recent reports indicate that Generation Z has a personalized and urgent demand for vision correction, driving innovation and iteration in refractive surgery technologies [9]. - Aierkan has introduced new refractive surgery solutions, such as All-Laser LASIK, which utilizes various data for personalized treatment. Since its launch at the 2023 China International Import Expo, over 50,000 surgeries have been performed, with more than 100 hospitals equipped with the technology [10].

Core Viewpoint - Aier Eye Hospital's stock has experienced a decline in recent trading sessions, with a current price of 12.74 CNY per share and a market capitalization of 118.81 billion CNY, indicating a challenging market environment for the company [1]. Financial Performance - For the first half of 2025, Aier Eye Hospital reported a revenue of 11.51 billion CNY, representing a year-on-year growth of 9.12%, while the net profit attributable to shareholders was 2.05 billion CNY, showing a slight increase of 0.05% [2]. - Cumulative cash dividends since the company's A-share listing amount to 7.12 billion CNY, with 3.60 billion CNY distributed over the past three years [3]. Shareholder Structure - As of June 30, 2025, the number of shareholders decreased by 1.00% to 343,900, while the average number of circulating shares per person increased by 1.01% to 23,064 shares [2]. - Among the top ten circulating shareholders, Hong Kong Central Clearing Limited holds 193 million shares, a decrease of approximately 17.99 million shares from the previous period, while Huabao CSI Medical ETF increased its holdings by 3.05 million shares to 155 million shares [3].