Incident: The company released its 2023 annual report, achieving operating income of 2,425 million yuan, a year-on-year increase of 14.55%, a year-on-year increase of 2.02%, achieving net profit withheld of 695 million yuan, a year-on-year decrease of 1.14%; in the fourth quarter of 2023, the company achieved operating income of 768 million yuan, an increase of 24.39% over the previous year, and achieved net profit of 182 million yuan, an increase of 4.90% over the previous year, and realized net profit of 144 million yuan, a year-on-year decrease of 14.48%; the market omitted Expectations.
2023Q4 revenue growth is accelerating, and profitability is under slight pressure.
(1) Growth analysis: In the fourth quarter of 2023, the company achieved operating income of 768 million yuan, up 24.39% year on year, up 11.36% month on month; realized net profit of 182 million yuan, up 4.9% year on year, down 16.23% month on month.
Mainly because: ① the market competition is becoming more intense, and gross margin decreased by 2.01 pct; ② the company continued to increase investment in new products, and R&D expenses increased 69.78% month-on-month; ③ the company continued to explore the market, and sales expenses increased 70.43% month-on-month.
(2) Profitability analysis: In 2023, the company's gross sales margin was 51.49%, a year-on-year decrease of 1.48pct; the net sales margin was 30.71%, a year-on-year decrease of 3.77pct. However, judging from recent years, gross margin and net interest rates are at the company's average level. The products are still very competitive, and the net interest rate is far higher than that of peers. The sales/management/finance expense ratios were 11.67%/4.27%/-2.07%, respectively, 0.91 pct/-0.79 pct/2.51 pct, respectively. The increase in financial expense ratios was mainly due to a decrease in the company's exchange earnings.
(3) Analysis of operating capacity and operating cash flow: The company's inventory turnover days in 2023 was 135.61 days, a year-on-year decrease of 13.62 days, and the number of accounts receivable turnover days was 68.45 days, an increase of 21.66 days over the previous year. Overall, the company has excellent operating capacity. Net operating cash flow was 675 million yuan, a year-on-year increase of 113.75%, further supporting the company's daily operating activities.
(4) Continuously increase investment in R&D: In 2023, the company invested 149 million yuan in R&D, up 21.31% year on year, accounting for 6.13% of revenue, up 0.34pct year on year. By the end of 2023, the company had 112 authorized valid invention patents (including 3 foreign authorized invention patents), 242 utility model patents, and 50 design patents. With intensive R&D investment, new products have been introduced in various business segments of the company, effectively enhancing the competitiveness of the company's product market.
Medical sector: Using dental imaging as a breakthrough, actively expanding to other specialties.
(1) In the dental field, the company continues to lead the development of the industry, keenly capture market demand, continuously optimize and enhance the market competitiveness of existing products through continuous technological innovation, and enhance the customer experience. The company released a new high-end seated oral CBCT, Pure-Detail image enhancement technology, and the “American American Dental” digital cloud platform for oral health, which has now been used by more than 3,000 customers.
(2) In 2023, the domestic economic environment is under pressure, and competition in the dental market is becoming increasingly fierce; the company is deeply involved in the dental industry, and medical equipment achieved sales revenue of 756 million yuan, an increase of 5.51% year on year; gross margin was 53.65%, down 2.22pct year on year.
Currently, the domestic dental industry is still in the development stage, and there is huge room for market development; the company is a leading domestic dental CBCT enterprise, and its market share is expected to continue to increase. At the same time, the company continues to increase investment in overseas medical exports. After several years of overseas market layout, the company's dental CBCT exports have begun to take shape in 2023.
(3) In other specialty fields, the company has many new product reserves. ① In January 2023, navigation equipment for spinal surgery obtained a medical device registration certificate. Currently, it is being promoted and applied as an exemplary in many hospitals. It has successfully completed dozens of cases of spinal surgery and is methodically advancing into mass market applications; ② In February 2024, mobile head CT also obtained a medical device registration certificate, further enriching the company's medical product line and enhancing the company's sustainable development capabilities; ③ The company is also actively promoting many pre-research projects such as interventional vascular surgery robots. We look forward to more products obtaining registration certificates in the future and further strengthening them. The company's competitiveness in the high-end medical imaging market.
Sales of color sorters surged 19.44%, and revenue from industrial inspection machines accelerated to over 100 million.
(1) In the field of color sorters, the company pioneered UV color sorter and UHD deep learning color sorter. It also launched a special color sorter for small-leaf tea, integrated plastic bottle sorting equipment, and the Meiya Zhilian Industrial Internet platform to strengthen the competitiveness of the enterprise market. The growth trend of color sorters is good, especially in the relatively mature domestic market. Relying on strong product market competitiveness and flexible sales strategies, the company achieved both an increase in sales performance and market share. In 2023, the company's color sorter achieved sales revenue of 1,476 billion yuan, a year-on-year increase of 19.44%; gross margin was 49.29%, a year-on-year decrease of 0.17pct.
(2) In the field of industrial inspection, the company released a new X-ray detector for small to medium packaging, bottled food. The equipment is equipped with deep learning and four-view technology that can not only accurately identify and remove foreign objects, but also comprehensively improve the scope of recognition and detection efficiency, bringing a better user experience and supporting performance growth. In 2023, the company's industrial inspection machines achieved sales revenue of 157 million yuan, an accelerated year-on-year increase of 60.98%, and achieved revenue exceeding 100 million yuan for the first time.
Maintain a “buy” rating. Considering the pressure on the domestic economic environment and intense competition in the dental market, we lowered the company's profit forecast. The company's revenue for 2024-2026 is expected to be 2,815 billion yuan, 3.52 billion yuan, and 3,684 billion yuan (the value before 2024-2025 was 3,011 billion yuan and 3.46 billion yuan respectively), with year-on-year increases of 16%, 16%, and 13%, respectively; net profit to mother is 897 million yuan, 1,038 million yuan, and 1.06 billion yuan respectively (the value before 2024-2025 was 987 million yuan, respectively. 1,157 billion yuan), with year-on-year increases of 20%, 16%, and 16%; EPS was 1.02 yuan, 1.18 yuan, and 1.37 yuan respectively (pre-2024-2025 values were 1.11 yuan and 1.31 yuan, respectively); according to the stock price on March 29, 2024, the corresponding PE was 19.0, 16.4, and 14.2 times, respectively. The dental circuit has growth characteristics, and the reduction in dental implant fees is expected to accelerate the penetration rate of equipment in the long term. As a leading domestic dental equipment company, the company is speeding up overseas expansion, has a definitive premium, and maintains a “buy” rating.
Risk warning: The development of the food testing industry falls short of expectations; the development of overseas business falls short of expectations; the development of the domestic dental CBCT industry falls short of expectations; the risk of increased competition in the domestic dental CBCT market; the development of chair-side repair systems falling short of expectations; the uncertain impact of exchange gains and losses on the company's performance; the uncertain impact of other operating income on the company's performance.