MODERN DENTAL announced that the sales volume of products for the first quarter of 2017 was 434,107 units (up 36.79% year on year), and the average product price was HK$1,203 (up 4.25% year on year). Considering that sales were generally in line with our expectations, we maintained our EPS forecasts as follows: HK$0.18 in 2017 (up 74.12% year on year), HK$0.23 in 2018 (up 29.37% year on year), and HK$0.28 in 2019 (up 21.87% year on year). Given the company's strong sales in the North American market, we raised our target price to HK$4.10. The current price has 21% upside from the target price, so the buying rating is maintained.
The North American market performed strongly. In October 2016, MODERN DENTAL acquired MicroDental Group North America and became a leader in the North American denture industry. MicroDental has been developing for 40 years and currently has 19 dental clinics in the US and Canada. After being acquired by MODERN DENTAL, MicroDental contributed HK$97.71 million in sales revenue to the Group in 2016, but due to deferred tax charges and one-time expenses arising from the acquisition, the Group lost HK$6.12 million in 2016. In the first quarter of 2017, the Group sold 132,706 products in the North American market (up 265.25% year on year), of which MicroDental contributed 91,000 units. Our model conservatively estimates that sales will reach 430,000 units in North America in 2017, and we believe this target is highly achievable.
Global development is stable. In the first quarter of 2017, the European market still contributed the most to the Group's revenue, with product sales increasing 9.48% year-on-year. Although the Chinese market has the highest sales volume, it is hampered by lower product unit prices and fierce competition. We believe that the current pace of development of the company in the Chinese market is slow. Due to the increase in corporate orders, sales in Australia and New Zealand increased by 36.86% year-on-year in the first quarter, but a large number of corporate orders lowered product unit prices to a certain extent while increasing sales volume.
Average product unit price improvement. In the first quarter of 2017, the company's average product unit price was HK$1,203 per unit (HK$1,154 per unit in the same period in 2016). We believe that the main reason for the 4.25% increase in product unit prices is that the company continues to promote its development strategy of gradually shifting focus to high-end products, thereby increasing product profit margins to a certain extent.
Maintain buys. We maintain our EPS forecasts as follows: HK$0.18 in 2017 (up 74.12% year on year), HK$0.23 in 2018 (up 29.37% year on year), and HK$0.28 in 2019 (up 21.87% year on year). Considering the company's strong sales in the North American market, we raised our target price to HK$4.10, representing 23 times 2017 PE and 2.1 times 2017 PB, or 17.8 times 2018 PE and 1.9 times 2018 PB. The current price has 21% upside from the target price, so the buying rating is maintained.