The market of oral medical services in China continues to expand, and the market share of private oral medical services is gradually increasing.
In recent years, the aging population and the improvement of public awareness of oral health have led to an increasing demand for oral health services in China. According to the Frost Sullivan report, the market size of private oral medical services has increased from 43.3 billion yuan in 2015 to 83.1 billion yuan in 2020, with a compound annual growth rate of 13.9 percent and is expected to reach 241.4 billion yuan in 2025. The main growth drivers include escalating consumption and increased awareness of oral care, an increase in the number of cases of oral diseases and favourable regulatory policies.
Riel Dentistry is a leader in the field of high-end private oral medical services. The discretionary pricing of dental service products of high-end private dental service providers is relatively high, which can meet the needs of consumers in the upper market by providing high-quality, value-added and personalized dental treatment. According to Frost Sullivan's report, in terms of the total income generated in 2020 or the income generated by the stomatology department of the General Medical Center, Riel Dentistry is the leader in the field of high-end private oral medical services, accounting for 24.1% of the high-end private oral medical service market, followed by MALO CLINIC and The UnitedFamilyHealth Medical.
The two-brand strategy keeps pace with each other, and the number of stores in the healthy period is gradually increasing. Ruier Dentistry mainly provides high-end oral care services to wealthy consumers in China's first-tier and emerging first-tier cities. Ruitai Dental mainly provides treatment to middle-class customers in first-tier and second-tier core cities in North, East, South and West China.
Through Ruier Dental and Ruitai oral brands, the company adopts a dual-brand strategy to serve customers with different economic and regional backgrounds. In fiscal year 2022, the proportion of the number of clinics in the steady growth period of the company reached 56%, the proportion of income reached 74%, and the proportion of profit reached 96%. With the increase in the proportion of the number of clinics and the proportion of income in the steady growth period, the inflection point of the company's overall profit will gradually appear.
Coverage for the first time, giving a "overweight" rating. It is estimated that the company's EPS for fiscal year 23-25 will be HK $0.51 (equivalent to HK $0.09 pound 0.38 pound HK $0.56). With reference to comparable company valuations, we give real Group 24 times PE in fiscal year 2024, with an estimated FY2024 EPS of HK $0.38, corresponding to a target price of HK $9.12 in 2023, with an "overweight" rating for the first time.
Risk hints: COVID-19 epidemic uncertainty risk, medical malpractice risk, competition intensification risk, etc.