Brief performance review
On April 25, 2024, the company released its 2023 annual report. In 2023, the company achieved revenue of 2,847 million yuan (+5% YoY), net profit to mother of 500 million yuan (-9% YoY), and net profit of 481 million yuan (-8% YoY).
At the same time, the company announced its results for the first quarter of 2024, with single-quarter revenue of 708 million yuan (+5% YoY), net profit to mother of 173 million yuan (+3% YoY) and net profit of 170 million yuan (+4% YoY).
Management analysis
The number of outpatients has been recovering steadily, and collection has helped the company increase the number of dental implants. In 2023, the number of dental clinics in the company reached 3.3533 million (+14% year over year), and the number of dental outpatients recovered steadily. Furthermore, the company has implemented a dental implant collection policy to help the implant sector grow rapidly in revenue.
In terms of dental implant business, the company achieved implantation of more than 53,000 implants in 2023 (+47% year over year), and implant business revenue of 479 million yuan (+7% year over year). In terms of other business, pediatric business revenue was 499 million yuan (+3% YoY); repair business revenue was 456 million yuan (YoY +7%); comprehensive business revenue was 756 million yuan (+8% YoY), and orthodontics business revenue was 499 million yuan (-3% YoY). All business segments achieved steady growth.
The “dual brand strategy” in Zhejiang Province progressed smoothly, and the revenue growth rate outside the province exceeded 20%, increasing the supply of medium and low service products. The company successfully promoted the “dual brand strategy” in Zhejiang Province. By the end of 2023, Hangzhou Stomatological Hospital and Ningbo Stomatological Hospital had opened 62 institutions in Zhejiang Province, and more than 10 were under construction. In 2023, the company's revenue in Zhejiang Province was 2,568 billion yuan, an increase of 3.55% over the previous year. Outside Zhejiang Province, in 2023, the company had revenue of 264 million yuan (+21% year over year) and gross profit margin of 24.79% (+0.73 pct year on year). In the future, as the company adjusts the pharmaceutical layout according to the new sales situation and increases the supply of land cultivation service products, it is expected that the market share will be further increased.
Profit Forecasts, Valuations, and Ratings
Considering the overall consumer and medical environment, we lowered the company's net profit to 702 million yuan and 869 million yuan. We expect the company to achieve net profit of 1,035 million yuan in 2026, with year-on-year increases of 40%, 24%, and 19%, respectively. EPS is 2.19, 2.71, and 3.22 yuan respectively. The PE corresponding to the current price is 26, 21, and 17 times, maintaining the “increase” rating.
Risk warning
Policy risks; increased market competition risks; risk of talent shortage; risk of cross-regional development; risk of medical safety accident disputes, etc.; compliance risk; risk of dental implant collection incidents.