The company released its 2023 annual report. In 2023, it achieved operating income of 1,476 million yuan (yoy +16.2%), achieved adjusted net profit of 179 million yuan (yoy -16.0%), achieved revenue of 1,331 billion yuan (yoy +5.5%) in the domestic market in 2023, and achieved revenue of 150 million yuan in the international market.
The Brazilian market is proceeding with the integration plan in an orderly manner, and a new breakthrough has been achieved in the international market. The company continues to have the highest share in the domestic market. At the same time, it has also achieved important breakthroughs in international business, becoming the main driving force for the company's growth. The company entered the Brazilian market through the acquisition of Aditek and promoted the integration plan in an orderly manner to support the rapid growth of the company's invisible correction business. Since the company officially launched international business in 2023, the company has built a local business team with rich experience in the orthodontic market in Europe, Australia, New Zealand, North America, etc. During the reporting period, the company achieved a delivery cycle of approximately 8.5 working days from plan confirmation to delivery to the user for the global regional market.
Domestic market share remains leading, and braces are rapidly growing in the international market. The number of cases achieved by the company's invisible braces was 245,000 (yoy +33.2%), (1) the number of cases completed in the domestic market was 212,000 (yoy +15.3%), of which the number of cases completed in the third and fourth tier markets increased steadily. The adjusted net profit margin in the domestic market in 2023 was 260 million yuan (yoy +29.9%), an adjusted profit margin of 19.3%, an increase of 3.7% over the same period in 2022; (2) The number of cases achieved in the international market development phase was 33,000, accounting for 13.5% due to early investment in the international market development phase Larger, the adjusted loss for the international market was 210 million yuan.
The company continues to increase investment in R&D, which has led to a reduction in the unit cost of invisible braces and an increase in gross margin.
(1) The company's revenue from invisible orthodontic solutions was 1.28 billion yuan (yoy +6.0%), with a gross profit margin of 65.7%, an increase of 1.9 pct over the previous year; (2) Product sales revenue of 180 million yuan (yoy +296.4%), a gross profit margin of 42.6%, an increase of 15.5pct over the previous year. Mainly, the gross margin of products sold in the international market was higher than the gross margin of in-mouth scanners sold in the domestic market. The revenue from sales of braces, braces and other products in the international market (including Aditek) ; (3) Revenue from other services was 0.18 billion yuan.
The investment rating was downgraded to “increase holdings”. We are optimistic about the company's differentiated product matrix and the company's firm promotion of the two major strategies of digitalization and globalization, which are expected to link doctors and patients more efficiently. Considering the company's continued expansion of international business and the investment of sales expenses in the domestic market, we expect the company's net profit to be 0.72/1.51/310 million yuan in 2024 to 2026, an increase of 35%/109%/105% over the previous year. The corresponding PE is 158.0/75.5/36.9 times, downgraded to an “increase” investment rating.
Risk warning: Overseas business expansion falls short of expectations, risk of changes in the domestic market competition pattern, consumer medical demand recovery falls short of expectations, etc.