[Investment points]
Overall revenue grew steadily, and net profit increased sharply. 23H1 achieved revenue of HK$1,602 million, up 12.10% year on year, and net profit of HK$210 million, up 109.3% year on year.
Among them, fixed dental equipment revenue was HK$1,014 million, +9.76% year on year; activity denture equipment revenue was HK$351 million, +33.66% year on year; and other business revenue was HK$237 million, or -2.24% year on year.
The trend of digitalization is accelerating, triggering new growth drivers. The digitalization of the global denture industry has accelerated the process of industry integration, and the future growth trend is strong. As a pioneer in digital solutions, MODERN DENTAL has a central digital process, an experienced team, advanced equipment and a mature network to meet customer needs. Its continuous digital transformation is superior to peers, improves the patient experience, and has a high competitive advantage. With the steady increase in demand for the company's products from existing customers and new customers, the company's market share has further increased under the trend of digitalization. The number of digital solution cases produced by 23H1 in the Mainland reached 373,985, an increase of 50.9% over the previous year.
The global layout continues to advance, and sales in each region are growing steadily. As the world's leading denture equipment supplier, dealer and consultant, the company has taken a leading position in the denture industry in Europe, North America, Greater China, Australia and other countries with the advantage of sales and distribution networks and with the support of global digitalization trends. 23H1's regional revenue increased by 16.4%, 8.6%, 16.8%, 16.9% and 27.9% respectively. 23H1 continues to launch new products and the most advanced digital process in the European market with revenue of up to 44.3%, further driving the increase in order volume; in the North American market, which accounts for 24.6% of revenue, is exclusively responsible for serving medium and large dental clinic chain customers in the North American market through newly established Vietnamese production facilities, increasing overall production capacity with lower labor and manufacturing costs; in the Greater China market, which accounts for 21.9% of revenue, the company will make full use of the increase in demand for implants brought about by the collection of dental implant systems, and increase terminal products and transparent orthotic products in the mainland. Expanding the depth and breadth of the product portfolio is expected to further gain greater market share.
Business expansion rates are stable, and profitability has increased greatly. 23H1's sales and management expenses were 12.57% and 23.48%, respectively, compared with the previous year, -0.73 pct and -1.94 pct, respectively. The increase in sales expenses was in line with the increase in sales, but was partially offset by the appreciation of the Hong Kong dollar. However, the increase in company management expenses is mainly due to an increase in product development expenses, including Toushuri, and an increase in the number of employees. The gross sales margin and net sales margin of 2023H1 were 54.15% and 13.13%, respectively, compared with the previous year, +5.47 pct and +6.10 pct, respectively. The company's 23H1 production capacity utilization rate and sales order volume continued to grow, while the trend of digitalization in the dental industry drove a further increase in the proportion of digital solution cases. Coupled with the 5.8% depreciation of the RMB against the Hong Kong dollar, the company's overall profit margin level increased significantly.
[Investment advice]
The company's business grew steadily in the first half of the year, net profit increased significantly, and profitability further improved. As the world's leading denture company, the global layout of MODERN DENTAL continues to advance. By finding growth points according to local conditions, sales in each region continue to grow. At the same time, the company will seize the digital trend of the global denture industry and further increase its market share through competitive advantages. We gave the company operating income of HK$32.16/36.55/4.114 billion for 2023/2024/2025, respectively, net profit of 3.51/4.22/HK$500 million, and EPS of HK$0.37/0.44/0.52 billion respectively. The corresponding PE was 8/7/6 times, respectively, and gave the company a “increase in holdings” rating.
[Risk Reminder]
Risks of changes in the global economy and multinational business environment
Risk of excessive concentration of production facilities
Foreign exchange risk