Recommended logic: 1) the incidence of dental caries in children is increasing, the trend of aging is increasing, the demand for oral care in China continues to expand, the supply of stomatologists has increased from 117000 in 2011 to 321000 in 2021, and the resources of doctors have made up to drive the steady growth of the industry. as a leading enterprise, the company is expected to fully enjoy the development dividend of the industry. 2) the dual-brand strategy positioned different needs and expanded against the trend during the epidemic. At present, the company has a total of 8 hospitals and 114 clinics, distributed in the provincial capitals and municipalities directly under the Central Government, such as Shanghai, Beijing, Guangzhou and Chengdu, involving 15 cities. reserve strength for follow-up performance growth 3) the company's high-quality dental resources are conducive to building a reputation, more than 46.8% of full-time dentists have a master's degree or above, and the doctor incentive mechanism is conducive to the retention of core doctors, driving the company's performance growth.
The demand for oral health care continues to grow, and the supply of doctors drives the development of the industry: the incidence of dental caries in children is increasing, the trend of aging is intensified, the demand for oral health care in China continues to expand, and the oral health service industry is highly dependent on medical technology. the supply of stomatologists has driven the development of the industry, and the supply of stomatologists in China has increased from 117000 in 2011 to 321000 in 2021. As a leading enterprise, the company is expected to fully enjoy the development dividend of the industry.
The dual-brand strategy positioned different needs and expanded against the trend during the epidemic: Ruier Dentistry focused on developing clinic business, and Ruitai Dental Clinic and Hospital expansion were expected to be carried out at the same time. Ruier Dentistry and Ruitai Stomatology expanded a total of 32 and 65 clinics in 5 years, respectively. As of September 30, 2022, the company operates 8 hospitals and 63 clinics under Ruitai oral brand and 51 clinics under Ruier dental brand, with a total of 8 hospitals and 114 clinics. distributed in Shanghai, Beijing, Guangzhou, Chengdu and other provincial capitals and municipalities directly under the Central Government, involving 15 cities, expanding against the trend during the epidemic, setting up momentum for follow-up performance growth.
The dentist is first-class, and the incentive mechanism is conducive to the retention of doctors. As of September 2022, there are more than 910 company dentists, more than 46.8% of full-time dentists have master's degree or above, 208 about 23.6% of full-time dentists have more than 15 years of dental experience, and the dental qualification industry is first-class; for young doctors, the company has a complete training system, and for core doctors, the company adopts a partnership system to give rich incentives to drive the development of the company while retaining the backbone.
Earnings forecast and rating: the company's EPS from 2023 to 2025 is expected to be RMB0.02 / 0.16x0.23 respectively, with a compound income growth rate of 25.1% in the three years at the revenue end. As most of the hospitals of the company are in the training period, the loss of hospitals during the training period lowers the company's net profit, so the PS valuation method is chosen. According to the average valuation of the industry and taking into account issues such as the liquidity of Hong Kong shares, the company was given a "buy" rating of 4 times PS in fiscal year 2024, corresponding to a market capitalization of 8 billion yuan, or about HK $9.232 billion, and a target price of HK $15.89 for the first time.
Risk hints: policy risk, new hospital less than expected risk, epidemic risk and so on.