Summary of Aier Eye Hospital Earnings Review Company Overview - **Company**: Aier Eye Hospital (300015.SZ) - **Industry**: Ophthalmology healthcare services in China Key Financial Results - **1H25 Revenue**: Rmb11,507 million, up 9.1% year-over-year (yoy), slower than expected (-1.6% vs. Goldman Sachs estimate) [1][2] - **1H25 Net Profits**: Rmb2,051 million, up 0.1% yoy, but down 9.9% vs. Goldman Sachs estimate due to lower non-operating income [1][5] - **EBIT**: Not explicitly stated, but implied to be in line with expectations [5] Segment Performance - **Refractive Surgery Revenue**: Grew by 11% yoy in 1H25, indicating strong demand despite weak consumption confidence [2][4] - **Optometry Services Revenue**: Increased by 15% yoy in 1H25, reflecting robust growth [2][4] - **Cataract Surgery Revenue**: Only grew by 3% yoy, attributed to: - Tightening national healthcare insurance budget in 2Q25 - Delayed demand due to weak macroeconomic conditions [2][4] Market Dynamics - **Demand Pull-Forward**: Earlier admissions for military academy/military recruitment created a pull-forward effect, impacting 2Q25 demand [1][2] - **Technological Advancements**: The company is promoting new technologies in refractive surgery (e.g., SMILE pro) to maintain average selling prices (ASP) and avoid price competition with smaller hospitals [2][11] Future Outlook - **Cataract Surgery**: Expected gradual improvement in 2H25 as the company adapts to the tightening budget [2] - **Target Market**: Increasing opportunities from the 50+ demographic with a net worth over Rmb3 million, particularly in premium treatments [11] Valuation and Investment Thesis - **Price Target**: Rmb15, with an upside of 8.5% from the current price of Rmb13.83 [12][14] - **Investment Rating**: Buy, supported by improving fundamentals and attractive risk-reward profile [11][12] - **Revised Profit Estimates**: Net profit estimates adjusted down by 2.6% for 2025E due to lower non-operating income and slight pressure on gross profit margin (GPM) [9][10] Risks - **Cataract Surgery Premiumization**: Risk of slower-than-expected premiumization trend [12] - **Price Competition**: Intensifying price competition in refractive surgery [12] - **Policy Impact**: Potential pricing pressure from policies related to OK lenses [12] Additional Insights - **Gross Profit Margin (GPM)**: Decreased to 48.6% in 1H25 from 49.4% in 1H24, primarily due to lower margins from newly opened flagship hospitals with high investment costs [9]

Investment Rating - The report assigns a Neutral rating to Aier Eye Hospital with a 12-month target price of Rmb14, indicating a potential upside of 12.9% from the current price of Rmb12.4 [10][8]. Core Insights - Aier Eye Hospital is experiencing improvements in refractive surgery pricing due to new technologies, with a forecast of double-digit revenue growth for 2025 [2][7]. - The company anticipates a recovery in cataract surgery revenue growth to double digits in the second half of 2025, following price cuts of approximately 8-10% since the second half of 2024 [9][7]. - The overall ophthalmology market in China is expected to grow at a 12% CAGR from 2020 to 2030, driven by increased service upgrades and market penetration [7]. Summary by Sections Recent Trends - Growth in refractive surgeries slowed in April and May after a busy first quarter, but June showed improvement due to an increase in average selling prices (ASP) from new technologies [3]. - Cataract surgeries faced volume declines due to tightening reimbursement policies, while optometry performance remained moderate [3]. Refractive Surgery Pricing - New technologies such as SMILE 4.0 and SMILE pro have been launched, with SMILE 4.0 contributing 12% of refractive surgery revenue in Q1 2025 [3][6]. - The ASP for SMILE 4.0 is around Rmb18,800, with approximately 100 installations [3]. Cataract Surgery Outlook - The company expects cataract surgery revenue growth to recover to double digits in H2 2025, as the lower prices from H2 2024 are now reflected [9]. - Premium cataract surgeries accounted for 45%-50% of total cataract surgeries as of Q1 2025, with 15% of revenue coming from femtosecond laser-assisted surgeries [9]. Optometry Services - Recent pricing pressure on OK lenses was noted, particularly after public hospitals in Beijing reduced prices by 50% [9]. - The annualized cost for OK lenses is around Rmb10,000, while defocal lenses cost only Rmb2,000 to Rmb3,000 [9]. Overseas Expansion - Aier Eye Hospital is focusing on expanding its presence in South America [9].