The 2023 results are largely in line with our expectations
The company announced its 2023 results: revenue of 414 million yuan, a year-on-year decrease of 4.52%; net profit to mother was 191 million yuan, up 2.98% year on year, corresponding to profit of 1.06 yuan per share, net profit deducted from mother 168 million yuan, an increase of -2.71% year on year. In 2023, the company's sales expenses ratio was 25.7%, down 1.3 percentage points year on year, and management expenses ratio was 6.5%, down 0.3 percentage points year on year.
Development trends
Companies in the dental sector are expected to actively invest in accurate marketing. In 2023, revenue from oral repair membranes was 199 million yuan, -3.87% year-on-year, and bone repair materials were 31 million yuan, a year-on-year decrease of 22.20%. The gross margin of oral repair membranes in 2023 was 90.59%, down 0.78 percentage points from the previous year. According to the company announcement, due to the implementation of policies such as dental implant collection, dental implant demand has structural characteristics, and the company's film powder products are in line with market trends. In 2024, we expect the company to continue active and accurate marketing, further consolidate the market share of the private market and actively explore public market development opportunities.
Absorbing durocephalic (ridges) membrane patch products have maintained a growing trend. In 2023, the product's revenue was 165 million yuan, up 5.87% year over year. The sector's gross margin was 92.3%, up 0.57ppt year over year. According to the company's 2023 annual report announcement, the company's products were successfully selected to participate in the centralized volume procurement led by the inter-provincial alliance led by Liaoning Province and the inter-provincial alliance led by Shaanxi Province. Furthermore, it successfully won successive bids in successive procurement in Jiangsu Province in June 2023 and subsequent procurement in Hebei Province and Shandong Province in January 2024. As of March 2024, the company announced that it still maintains the record of winning bids in all provinces where this product was collected, and we expect the company to continue to maintain its market advantage in the future.
The company actively lays out new products. According to the company's announcement, as of March 2024, 1) the company's active biological bone products have successfully completed the conversion verification work, and have completed networked in more than 2/3 of the provinces; 2) the company has successively obtained “Medical Device Registration Certificates” for phosphotic acid corrosion agents and dental fissure sealants, further enriching the company's product line in the dental field. The company's products can absorb hard brain (spine) membrane patches and skin repair membranes to complete continuous registration. 3) The company's products biological repair film and light-curing composite resin have entered the registration and repair stage.
Profit forecasting and valuation
Affected by demand in the dental market, we slightly lowered our 2024 revenue forecast by 5.1% to 476 million yuan, but considering the improvement in the company's expense ratio, we maintained our 2024 net profit forecast of 215 million yuan, and introduced a net profit forecast of 260 million yuan for the first time in 2025. The current stock price corresponds to 20.0 times the 2024 price-earnings ratio and 16.5 times the 2025 price-earnings ratio. We maintain a “outperforming industry” rating. We maintain our target price of 28.00 yuan, which corresponds to a price-earnings ratio of 23.3 times 2024 and a price-earnings ratio of 19.3 times 2025, with 17.3% upside compared to the current stock price.
risks
Product R&D registration fell short of expectations, new product promotion fell short of expectations, and implementation of volume procurement policies exceeded expectations.