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On August 31, 2023, the company announced its 2023 interim results announcement. In the first half of 2023, the company achieved operating income of HK$1,606 million, an increase of 12.15% over the previous year; achieved net profit of HK$211 million, an increase of 111.52% over the previous year; net profit after deducting non-return net profit of $209 million, an increase of 116.81% over the previous year.

2023Q2 achieved revenue of approximately HK$818 million in a single quarter, an increase of 6.79% over the previous year and 3.81% over the previous quarter in 2023Q1.

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Performance recovered steadily after the epidemic, and core market revenue continued to grow

2023H1 As the company's market share continues to increase due to domestic reopening and the digital trend in the dental industry, the company achieved product sales volume of 1,056 million units, an increase of 16.5% over the previous year. The recovery trend is good; the average unit price was HK$1,424, a decrease of 1.5% from the previous year. The slight decline in average sales price was mainly due to exchange rate fluctuations. With the advantages of sales and distribution networks, the company continues to be in a leading position in major markets around the world. Among them, Europe achieved sales revenue of HK$710 million, up 16.4% year on year; North America achieved sales revenue of HK$394 million, up 8.6% year on year; Greater China achieved sales revenue of HK$351 million, up 16.8% year on year; and Australia achieved sales revenue of HK$124 million, up 16.9% year on year.

Digital solutions continue to grow, with invisible orthodontic products contributing new volume. The company continues to grasp the growing demand for dental treatment and accelerate the digital transformation of dentistry. The number of digital solution cases (overseas and domestic, excluding digital solution cases produced by the company's non-mainland Chinese production plants or overseas, satellite dental laboratories) reached 37,3985, an increase of 50.9% over the previous year. As an industry leader, the company is expected to seize the opportunities of market integration and digital dental development, providing the most for the dental field in the market 2023H1 Advanced digital solutions further increase market share and customer stickiness. At the same time, 2023H1's own orthodontic device, achieved sales of HK$15.357 million, an increase of 25.9% over the previous year, which is expected to become a new growth point.

Operating efficiency continues to improve, new production capacity is expected to further improve production capacity. The company's operating capacity continues to improve, and various financial indicators have performed brilliantly. 2023H1 achieved a gross profit margin of 54.2%, an increase of 5.5 percentage points over the previous year, mainly due to the continuous increase in the company's capacity utilization rate and sales order volume and the increase in the proportion of digital solution cases; by product, 2023H1 fixed denture gross margin was 56.5%, up 5.4 pct year on year; gross margin for active dentures was 55.1%, up 5.8pct year on year; other business gross margin was 42.9% , a year-on-year increase of 4.2 pct. We believe that with the company's investment in Dongguan Phase II and production facilities in Vietnam, it is expected that it will continue to drive an increase in operating capacity.

Profit Forecasts and Ratings

The company's performance recovery trend is good, and it is expected to seize the digital development opportunities of the industry and continue to maintain steady growth. At the same time, as the company's capacity utilization rate continues to increase, gross margin is expected to recover further. According to the company's 2023 interim results, the revenue forecast for 2023-2024 remained at HK$33.72/3,905 billion, and the 2025 revenue was HK$4,523 million; the net profit forecast was raised from HK$303/390 million to $371/449 million, and the 2025 net profit forecast was HK$543 million; and the “buy” rating was maintained.

Risk warning: global economic and multinational business risks; risk of recurrent epidemics; risk of concentration of production facilities; exchange rate risk