20221101-西牛证券-清晰医疗-01406.HK-A_better_timing_is_needed_to_reflect_the_value_of_the_foreseeable_expansion_20页_767kb

Clarity Medical (01406.HK) Summary

Core Content

Clarity Medical (01406.HK) is a private healthcare institution specializing in ophthalmology, offering comprehensive ophthalmic services with a focus on refractive treatments and other eye-related procedures. The company has a presence in Hong Kong through two main medical centers in Central and Mong Kok, and has plans for further expansion in the region and potential entry into the China market.

Main Points

Expansion Plans in Hong Kong

• Mong Kok Medical Center Expansion: Renting an additional floor in Wai Fung Plaza with approximately 6,000 sq.ft. GFA, including 5 consultation rooms and 3 surgery rooms, expected to commence operations in early 2023.
• Tsim Sha Tsui Flagship Clinic: Planned to open in 2024 H2, featuring 10 consultation rooms and 4 surgery rooms.
• Growth Potential: The expansion is expected to provide growth opportunities, although the limited supply of qualified ophthalmologists could slow progress.

Performance During the Pandemic

• Resilience: Despite the impact of the pandemic, Clarity Medical (01406.HK) managed to deliver solid performance with a YoY increase of 1.8% in FY 2020/21 and 1.3% in FY 2021/22.
• Refractive Treatments: Conducted 5,234 refractive treatments in FY 2021/22, a 4.2% decrease from the previous year, primarily due to pandemic-related deferrals and cancellations.
• SMILE and LASIK Surgery Declines: SMILE surgery declined by 6.4% and LASIK by 15.0% in FY 2021/22, respectively.

Revenue Breakdown

• Refractive Treatments: Contributed HKD 152.6mn in FY 2021/22, with SMILE surgeries generating HKD 87.7mn and LASIK surgeries HKD 50.7mn.
• Other Eye Treatments: Revenue surged by 23.0% YoY to HKD 55.1mn in FY 2021/22, accounting for 24.4% of total revenue.
• Consultation and Examination Services: Generated HKD 10.2mn in FY 2021/22, with a fee range of HKD 300–8,000 per session.
• Prescription Services: Generated HKD 7.4mn in FY 2021/22, a 7.1% increase YoY.

Market Opportunities

• Cooperation with Hospitals: Clarity Medical (01406.HK) collaborates with non-specialized hospitals to broaden its customer base and income sources.
• China Market Potential: The company has allocated 30.5% of net proceeds for China market expansion, with pre-IPO investors like WuXi AppTec and chairman Mr. Wu Ting Yuk Anthony supporting the move.

Key Information

Valuation

• P/E Ratio: Trading at approximately 17.2x historical P/E for its operating business.
• Comparison: Lower than Aier (300015.CH) and C-MER (03309.HK), but higher than peers like Euroeyes (01846.HK) and Chaoju Eye Care (02219.HK).
• Caution: The valuation is seen as a potential obstacle, as the stock market slump and mean reversion could lead to multiple contraction.

Financial Highlights

• Revenue (HKD, mn): FY 2018/19: 206.6, FY 2019/20: 218.4, FY 2020/21: 222.4, FY 2021/22: 225.2.
• Operating Profit (HKD, mn): FY 2018/19: 40.7, FY 2019/20: 34.3, FY 2020/21: 44.7, FY 2021/22: 19.8.
• Operating Margin (%): FY 2018/19: 19.7%, FY 2019/20: 15.7%, FY 2020/21: 20.1%, FY 2021/22: 8.8%.
• Net Profit (HKD, mn): FY 2018/19: 30.0, FY 2019/20: 26.4, FY 2020/21: 35.8, FY 2021/22: 13.5.
• ROE (%): FY 2018/19: -, FY 2019/20: 32.7%, FY 2020/21: 35.2%, FY 2021/22: 8.0%.

Risk Factors

• Social Distancing Policies: May continue to affect operations.
• Intense Competition: From new entrants and aggressive expansion by China-funded peers.
• Profit Margin Pressure: Due to competitive pricing strategies.
• Supply Shortage of Medical Practitioners: Could hinder growth.
• Slow Expansion Progress: Potential delays in clinic expansion.
• Operating Expenses: Increased due to China market exploration.

Conclusion

Clarity Medical (01406.HK) has demonstrated resilience during the pandemic, maintaining a steady revenue growth and a strong position in refractive treatments. The company is expanding its footprint in Hong Kong and exploring the China market, which presents significant growth opportunities. However, its valuation is seen as a cautionary factor, and the company's ability to grow will depend on the success of its expansion plans and the ability to manage operational and market risks effectively.