Matters:
The company released its 2023 annual report: achieved revenue of 2,847 million yuan (+4.70%), net profit of 500 million yuan (-8.72%) to mother, deducted non-net profit of 481 million yuan (-8.37%). In a single quarter of the fourth quarter, revenue of 662 million yuan (+14.24%) was achieved, net profit attributable to mother was 0.11 million yuan (-134.01%), and non-net profit of -15 million yuan (-154.11%) was deducted.
Distribution plan: Based on 320 million shares, a cash dividend of 4.35 yuan (tax included) will be distributed to all shareholders for every 10 shares, for a total of 139 million yuan (tax included). It is proposed to distribute 4 bonus shares (tax included) for every 10 shares, for a total of 128 million bonus shares.
The company released its report for the first quarter of 2024: revenue of 708 million yuan (+5.03%), net profit to mother of 173 million yuan (+2.51%), deducted non-net profit of 170 million yuan (+4.20%).
Ping An's point of view:
The number of patients has been increasing steadily, and the dental implant revenue side is still growing in the context of collection: in 2023, the number of patients in the company was 3.3533 million, a year-on-year growth rate of about 13%, which is the main driving force for revenue growth. By disease type, the company's planting sector achieved revenue of 479 million yuan, an increase of 6.95% over the previous year.
In April 2023, dental implant collection was launched nationwide, and the unit price for dental implants dropped significantly. In 2023, the company actively embraced the collection policy. There were more than 53,000 dental implants, an increase of 47% over the previous year. Although the price of dental implants dropped sharply, the high growth rate of implants eventually led to a positive increase in implant revenue. The orthodontic sector achieved revenue of 499 million yuan, a year-on-year decline of 3.14%. Affected by external economic changes, consumer-related businesses are under pressure. Although the number of patients in the orthodontic sector has not declined, the share of invisible orthodontics has declined, which ultimately led to a decline in revenue. The company achieved revenue of 499 million yuan (+2.90%), 456 million yuan (+6.72%), and 756 million yuan (+8.34%) respectively, all of which achieved steady growth. The company's revenue growth rate for the first quarter of 2024 was 5.03%, maintaining the growth trend of 2023. The main reason is that the price of dental implants was not collected by the company in the first quarter of '23, and the price of dental implants dropped significantly in the first quarter of '24, which affected the volume of the company's revenue side. The number of dental implants in the company is expected to grow by 50% in the first quarter of '24, and the revenue side is expected to grow at 5%-6%. The consumer-related sector is under pressure, affecting the volume of the company's orthodontic business. The growth rate of the company's orthodontic business is expected to be within 5% in 2024Q1.
The dandelion plan is progressing steadily, laying the foundation for long-term growth: in 2023, the company will continue to advance the dandelion plan, building a total of 41 dandelion hospitals. In 2024, the company is expected to build 8 new dandelion hospitals to achieve rapid expansion. Currently, about 50% of Dandelion Hospital is profitable. As more branches go through the cultivation period, the company's profit side will usher in a new growth point.
Affected by factors such as dental implant collection, the company's gross margin and net margin both declined: in 2023, the company's gross margin was 38.53%, down from 40.81% in the same period last year. The company's net interest rate was 20.32%, which also declined from 22.65% in the same period last year. Dental implant collection combined with the decline in the share of invisible orthodontics in the orthodontic sector lowered the company's gross profit margin and ultimately affected the company's net profit margin. As the impact of dental implant collection becomes clear and the company's management capabilities continue to improve, the company's net interest rate is expected to rise steadily.
Maintaining the “Recommended” rating: Considering changes in the economic environment, we adjusted the company's profit forecast. The company's net profit for 24-26 is 589 million yuan, 720 million yuan, and 880 million yuan, respectively (the original forecast net profit for 2024-2025 was 915 million yuan and 1,160 million yuan). In the next 3-5 years, Tongze Medical will accelerate the opening of new hospitals to seize the Zhejiang dental market and further deepen the field of orthodontics and dental implants. The company has been developing for a long time and maintains a “recommended” rating.
Risk warning: Risk of industry growth falling short of expectations; risk of hospital acquisitions falling short of expectations; spread of pandemic diseases, which will have a negative impact on the industry.