Cornell Optics was founded on December 5, 1996 and listed on the Shenzhen Stock Exchange in March 2010. The securities were formerly referred to as "Knight", which is also the predecessor of Qitian Technology. In October 2016, Cornell Optics acquired Shanghai Qiji Intelligent Technology Co., Ltd. (hereinafter referred to as "Flag Intelligence") to explore the growth potential in the financial services sector. Qiji Intelligence's main business is bank card value-added services. Listed companies changed their names to "Qitian Technology".

Later, in order to solve the parallel development of financial business and resin glasses lens manufacturing, which led to resource competition and management focus distraction, the management split the lens business into a separate entity, that is, Cornite Optics, which is listed in Hong Kong.

The leading manufacturer of resin lenses in China, with a revenue scale of more than 1 billion.

According to the prospectus, Cornell Optics is China's leading manufacturer of resin glasses lenses, providing customers with a wide range of resin glasses lenses, including standardized lenses and custom lenses. The main products are resin glasses with refractive indexes of 1.499, 1.56,1.60,1.67 and 1.74. In addition to the refractive index, the company's glasses lenses are also distinguished by the following lens designs, namely flat light lenses, single light lenses, multifocus lenses, and progressive lenses.

During the track record period, Cornell products are sold in more than 80 countries, including, but not limited to, China, the United States, Japan, India, Australia, Thailand, Germany and Brazil.

According to Frost Sullivan data, in 2020, Cornant Optics ranked first among Chinese resin lens manufacturers in terms of resin lens production, with a market share of about 8.5%. The company is China's largest exporter with a market share of about 7.3%. Based on the revenue of resin glasses in 2020, the company ranks ninth in the world, with a market share of about 0.4%, and is the only group headquartered in China among the top 10 market participants in the world.

As the leading manufacturer of resin lenses in China, the scale of Knight Optics is growing. In the first five months from 2018 to 2021, the company's revenue was 854 million yuan (in RMB, the same below), 1.059 billion yuan, 1.093 billion yuan and 538 million yuan respectively, and the net profit in the same period was 78.5 million yuan, 112 million yuan, 129 million yuan and 64.6 million yuan respectively.

From a product point of view, standardized lenses are the main revenue of the company, accounting for about 80% of the total revenue. In the first five months from 2018 to 2021, the revenue of standardized lenses was 703 million yuan, 879 million yuan, 888 million yuan and 419 million yuan respectively, accounting for 82.3%, 83.1%, 81.2%, 80.9% and 77.8% of the total revenue, respectively. The revenue of custom lenses is 140 million yuan, 169 million yuan, 198 million yuan and 116 million yuan respectively, accounting for 16.4%, 15.9%, 18.1% and 21.6% of the total revenue respectively. From this point of view, the market performance of standardized lenses largely reflects the living situation of Conette Optics.

Regionally, Asia, including China, is a major sales destination for Cornite Optics, accounting for about 50% of the total revenue. In the first five months from 2018 to 2021, the sales revenue in Asia (except China) was 315 million yuan, 398 million yuan, 292 million yuan and 136 million yuan respectively, accounting for 36.9%, 37.5%, 26.7% and 25.2% of the total revenue respectively. China's sales revenue is 126 million yuan, 169 million yuan, 260 million yuan and 135 million yuan, respectively The proportion of total revenue is 14.7%, 16%, 23.8% and 25.1%, respectively. What is noteworthy is that the domestic market of Cornette Optics is growing significantly, with a three-year compound annual growth rate of 27% from 2018 to 2020.

As mentioned above, the performance of the standardized lens market, which accounts for 80% of revenue, determines the growth potential of Cornite Optics.

However, the growth of the company's standardized lenses has slowed both in terms of sales volume and price. In the first five months from 2018 to 2021, the company's sales of standardized lenses were about 98.732 million, 109 million, 105 million and 51.159 million respectively, and the average selling prices of standardized lenses in the same period were about 7.12,8.04,8.44 and 8.14 yuan, respectively. Volume and price growth are slowing down, Connett Optics is not optimistic.

Specifically, the standardized products of Cornite Optics are mainly divided into resin glasses with refractive index of 1.499, 1.56,1.60,1.67 and 1.74. With the increase of refractive index, the price of lenses becomes higher. For example, lenses with a refractive index of 1.74 will sell for an average of 49.41 yuan in the first five months of 2021, compared with 4.93 yuan for lenses with a refractive index of 1.499 in the same period.

Among them, lenses with a refractive index of 1.499 make the greatest contribution to the revenue of Connett Optics. In the first five months from 2018 to 2021, the revenue generated by the lens accounted for 38.9%, 33.1%, 33.5% and 32.7% of the total revenue generated by standardized lenses in the same period, respectively. Lenses with a refractive index of 1.499 have been a pillar of revenue for a long time, and other more competitive products are not growing fast, which is a red flag for Conant Optics.

Because generally speaking, in addition to the refractive index, the more additional functions, the higher the price. When companies introduce new lens products, they generally enjoy greater pricing flexibility, but as the relevant lens products enter the market for longer, they are more vulnerable to market price fluctuations of comparable products on the market. For example, in 2018, short progressive standardized lenses with a Cornite optical refractive index of 1.499 were sold for between 3.0yuan and 3.8yuan each. Subsequently, the price of the product dropped to 2.8 yuan to 3.6 yuan per piece in 2020.

The price of core products has been falling, causing the company's gross profit margin to be lower than that of its peers. From 2018 to 2019, the company's gross profit margin was 30.6% and 33% respectively, significantly lower than the gross profit margin of 44.78% and 51.24% of the main business of Mingyue lenses. It is even lower than end-consumer-oriented eyewear retailers with more bargaining room, such as PhD glasses with a gross profit margin of 71.17% in 2019.

In order to improve the business situation, Cornite Optics mainly through the following two ways to enhance profitability, consolidate market position and increase market share.
First, increase the production capacity of standardized lenses with higher refractive index to drive sales and occupy the market. According to the prospectus, after the completion of the two expansion plans of the Shanghai production base and the Jiangsu production base, the company's production capacity of standardized lenses and customized lenses is estimated to increase by about 19.2 million and 4.4 million pieces per year, respectively. It is worth noting that Cornite Optics plans to use the new production facilities to produce resin glasses with refractive indices of 1.67 and 1.74, with a total sales growth rate of about 19.2% over the past three years.

Second, it plans to develop downstream retail with higher gross margins, thereby improving profitability. According to the prospectus, Cornell Optics has set up retail stores and sold glasses with its own brand of resin glasses through e-commerce platforms, moving downstream to higher profit margins. This approach can not only improve the level of gross profit margin, but also further enhance the brand awareness of the company.

The prospect of the glasses industry is clear, and the uncertain factors in the middle reaches of the industry are still there.

As we all know, with the continuous growth of visually impaired patients and the gradual expansion of the demand for vision correction, the market capacity of the global glasses and lenses industry is still very large. Dongxing Securities pointed out that according to 2019 data, the number of myopia patients in the world has reached about 1.4 billion, and the number of myopia patients in China has exceeded 600m. As the number of myopic people in China has reached about 650 million in 2017, the CAGR from 2012 to 2017 is 7.63%. According to the compound growth rate of 7.63%, the number of myopic people in China is expected to reach 710 million in 2020.

This is also confirmed by the data disclosed in the prospectus of Connett Optics. According to the prospectus, resin glasses lenses are widely used in glasses lenses and sunglasses lenses. Global retail sales of resin glasses increased from $32.4 billion (about 211.9 billion yuan) in 2015 to $35.8 billion (about 234.1 billion yuan) in 2020, with a compound annual growth rate of 2.3 percent. The market is expected to grow to $46.5 billion (about 304.1 billion yuan) between 2020 and 2025, with a compound annual growth rate of 5.4 per cent.

In addition, with the help of many other positive factors, such as increasing purchasing power and increased awareness of the health of eyesight, the resin lens industry where Cornell Optics is located is expected to further expand and have a bright future. However, although the market capacity of the industry where Cornell Optics is located is worth looking forward to, as a company in the middle of the industry, there is a lot of uncertainty.

From the upstream and downstream chain, as the raw materials and markets are abroad, Cornell Optics is an obvious "two-sided" risk exposure company. Specifically, the main raw materials for upstream Cornite lenses are resin monomers, which mainly rely on imports-the largest supplier is a Japanese chemical company, accounting for more than 40% of the total procurement all the year round). As the raw materials mainly rely on imports, it will easily lead to high procurement costs and increase uncertainties.

Downstream, Cornite Optics's business is also mainly distributed overseas and is China's largest exporter by export value. While business sales rely on overseas markets, which will mean that it is vulnerable to global fluctuations, exchange rate factors and other risks. Take the impact of the previous financial crisis as an example, when foreign demand fell sharply, the sales of Cornite Optics also suffered a direct impact, with sales declining. In short, Cornell Optics is a "two-sided" risk exposure company, which is vulnerable to upstream and downstream squeeze, which is most obvious in gross profit margin.

However, at present, as the largest resin lens manufacturer in China, Cornite Optics has a leading advantage, and the prospect of the industry is very clear, the future development is still worth looking forward to.