Investment Rating - The investment rating for the company is "Buy" with a target price of RMB 17.63 [1][5]. Core Views - The company has shown positive growth in its performance, with a revenue of RMB 11.507 billion in 1H25, representing a year-on-year increase of 9.1%. The net profit attributable to the parent company was RMB 2.051 billion, a slight increase of 0.1% year-on-year, while the net profit excluding non-recurring items was RMB 2.040 billion, up 14.3% year-on-year [1]. - The company's optical business has led the overall revenue growth in 1H25, with significant contributions from various segments, including myopia prevention and control, refractive surgery, and cataract surgery [3]. - The company is expanding its global service network, with domestic revenue reaching RMB 9.990 billion (up 8.1% year-on-year) and overseas revenue at RMB 1.517 billion (up 16.5% year-on-year) [4]. Summary by Sections Financial Performance - In 1H25, the company's gross margin was 48.6%, a decrease of 0.9 percentage points year-on-year. The sales, management, and R&D expense ratios were 9.1%, 13.5%, and 1.3%, respectively, indicating an improvement in promotional efficiency [2]. - The operating cash flow for 1H25 was RMB 3.402 billion, reflecting a 19.7% year-on-year increase, indicating a continuous improvement in cash flow levels [2]. Business Segments - The optical segment generated RMB 2.720 billion in revenue (up 14.7% year-on-year), driven by the brand influence and service quality in myopia prevention [3]. - The refractive surgery segment reported revenue of RMB 4.618 billion (up 11.1% year-on-year), supported by the introduction of new surgical techniques and an expanding service network [3]. - The cataract segment achieved revenue of RMB 1.781 billion (up 2.6% year-on-year), with an increasing proportion of high-end surgeries [3]. - Other projects, including anterior and posterior segment projects, generated revenues of RMB 1.031 billion and RMB 0.785 billion, respectively, with the latter showing a 9.0% year-on-year increase [3]. Market Position and Strategy - The company has a robust domestic service network with 355 hospitals and 240 outpatient departments as of 1H25, reflecting a strategic push in its "1+8+N" strategy [4]. - The overseas market presence is also growing, with 169 eye centers and clinics established, enhancing the company's global influence [4]. Profit Forecast and Valuation - The forecast for net profit attributable to the parent company for 2025-2027 is RMB 3.914 billion, RMB 4.436 billion, and RMB 5.069 billion, respectively, with adjustments reflecting a 7%-10% downward revision compared to previous estimates [5]. - The company is assigned a PE ratio of 42x for 2025, compared to the industry average of 38x, supporting the target price of RMB 17.63 [5].

Core Insights - The company reported 2024 revenue and net profit of 4.027 billion and 429 million yuan, respectively, showing a year-on-year growth of 0.4% and a decline of 35.6%, which was below the Wind consensus estimate of 563 million yuan, attributed to temporary disruptions from industry demand slowdown and intensified competition, along with increased short-term investments in personnel and equipment [1] - In Q1 2025, the company achieved revenue and net profit of 1.093 billion and 150 million yuan, respectively, reflecting year-on-year growth of 11.7% and a slight decline of 4.0%, with a quarter-on-quarter increase of 29.3% and a significant rise of 1824.0%, indicating a marginal acceleration in performance [1] - The company announced a 2025 employee stock ownership plan, with performance assessment indicators requiring a minimum growth rate of 10%/20%/30% in revenue or net profit for 2025/2026/2027 compared to 2024, demonstrating long-term growth confidence [1] Revenue Growth by Segment - The consumer ophthalmology segment led the overall revenue growth in 2024, with refractive and optometry revenues of 1.296 billion and 1.069 billion yuan, respectively, showing year-on-year increases of 7.4% and 5.2%, supported by an improved diagnostic network and the introduction of various refractive and optometry projects, with expectations for steady growth in 2025 [2] - The posterior segment projects generated 536 million yuan in revenue in 2024, with a slight year-on-year increase of 0.2%, driven by the company's leading capabilities in complex eye disease treatment and clear demand for related services, with positive expectations for 2025 [2] - The cataract segment reported 873 million yuan in revenue, down 11.6% year-on-year, likely due to a high base from the rapid recovery of treatments post-pandemic in 2023; however, with increasing market penetration and a growing share of high-end cataract procedures, the segment is expected to return to growth in 2025 [2] Service Network Expansion - The company has been actively enhancing its service network through a dual strategy of organic growth and acquisitions, having established 62 ophthalmology specialty hospitals and 66 optometry centers by the end of 2024, compared to 57 and 60 at the end of 2023, respectively, creating a nationwide diagnostic service network [3] - Strategic acquisitions in 2024 included four ophthalmology hospitals, and several others have commenced operations, positioning the company as a large medical chain group with "dual top-tier" ophthalmology hospitals [3] Competitive Positioning - The company is expected to leverage the advantages of its benchmark hospitals to continuously enhance its overall competitiveness [4] Profit Forecast and Valuation - Considering the impact of new refractive procedures and increased personnel and equipment investments on sales and management expense ratios, the projected EPS for 2025-2027 is 0.57, 0.66, and 0.76 yuan, reflecting a downward adjustment of 22% for 2025 and 2026 compared to previous estimates [5] - The company is assigned a 40x PE for 2025, compared to a consensus average of 34x for comparable companies, leading to a target price of 22.87 yuan, down from a previous estimate of 27.03 yuan, which corresponded to a 37x PE [5]