Incident: The company released its 2023 annual report. In 2023, it achieved operating income of 1,476 million yuan (+15.98%, indicating a year-on-year ratio, same below), and achieved adjusted net profit of 179 million yuan (-16.0%). Its domestic business adjusted net profit reached 256 million yuan (+29.9%), and revenue was in line with our expectations.
The number of overseas cases showed impressive results, and the second curve developed smoothly. The company firmly promotes digitalization and globalization strategies, and has been recognized by professional doctors in advanced and mature orthodontic markets such as Europe, America and Asia, driving the global business into a stage of rapid growth. Since the company officially launched its international business in 2023, the company has successfully entered more than 30 countries and regions. The international market achieved revenue of 150 million yuan in 2023, and the number of cases completed by international market companies was 33,000. On the team side, the company has set up a local business team with rich experience in the orthodontic market. A total of 8 offices have been established outside of mainland China, and foreign employees are distributed in Europe and the Middle East (EMEA), North America (NA), Asia Pacific (APAC), and Latin America (LA).
The Chinese market has maintained high-quality growth. In 2023, the domestic market achieved revenue of 1,331 billion yuan (+5.5%), and the number of cases completed in the domestic market was 212,000 (+15.3%). By business, the company's revenue from invisible correction solutions was 1.28 billion yuan (+6.0%), and revenue from sales of products was 180 million yuan (+296.4%). The revenue from sales of products was mainly revenue generated from sales clean-up in the domestic market and revenue from the company's sales of brackets, braces and other products in the international market (including Aditek); revenue from other services was 0.18 billion yuan.
Digital intelligence continues to be empowered, and manufacturing capacity continues to improve. The company is orderly promoting collaborative empowerment with the holding company Aditek, Brazil's leading orthodontic product manufacturer, in medical design and intelligent manufacturing, including providing it with online training and on-site counseling for the A-Treat digital orthodontic solution design platform and iOrtho cloud service platform, and helping Aditek upgrade its intelligent manufacturing base in Brazil, thus having two major production centers in China and South America, laying the manufacturing foundation for strong global growth.
Continuously optimize manufacturing processes for innovative products such as anti-corrosion coatings, new attachment templates, angel buckles, angel poles, etc., to further improve processing yield. Globally, the average lead time from doctor confirmation of the plan to delivery to the user is 8.5 working days.
Profit forecast and investment rating: Considering changes in the macro environment, the impact of exchange and share payment fees on apparent net profit, etc., we adjusted the company's net profit to mother from 2024-2025 from 326/391 million yuan to 0.78/120 million yuan. It is estimated to be 164 million yuan in 2026, and PE corresponding to the current market value is 140/92/67 times. Considering the accelerated expansion of the company's overseas markets and domestic sinking markets, the scale effect continues to be reflected, maintaining a “buy” rating.
Risk warning: increased market competition, industry policy risks, trade friction risks, etc.