Incidents:
The company released its 2023/2024Q1 performance report, achieving revenue of 2,847/ 708 million yuan (+4.7%/+5.0%), respectively, net profit attributable to shareholders of listed companies of 5.00/173 million yuan (-8.7%/+2.5%), and net profit attributable to shareholders of listed companies of 4.81/170 million yuan (-8.4%/+4.2%) after deducting non-recurring profit and loss, respectively.
Comment:
Financial side: Profit margin performance stabilized in the first quarter, showing a marginal improvement trend. 1) In '23, the company achieved a gross profit margin of 38.5% (-2.3pct) and a net profit margin of 20.3% (-2.3pct). ① The company's cost structure was basically stable during the period, and the sales/management/ R&D/finance expense ratio was 1.03%/10.85%/1.95%/1.74%, which is basically equivalent to the same period in '22; ② We believe that the decline in gross margin and net margin was mainly due to factors such as the recovery of the dental industry falling short of expectations, the impact of the implementation of the dental implant collection policy on high-end implant business, and structural changes in the orthodontic business. Among them, the gross margin of the company's implant business decreased by an average of about 10%; 2) The 24Q1 company achieved a gross profit margin of 44.6% (-0.5pct), achieving a net profit margin of 44.6% (-0.5pct) The profit margin was 28.8% (-0.5pct), and the profit margin decline was relatively narrow. Looking at a single quarter, overall profitability remained steady.
Business side: The business structure is basically stable, and the planting business realizes price for volume. 1) In 23 years, implanting/orthodontics/pediatrician/restoration/comprehensive business accounted for 17.8%/18.6%/16.9%/28.1%, respectively, compared with +0.4/-1.5/-0.3/+0.4/+1.0pct, and the business structure was basically stable. The share of the 24Q1 business structure is basically the same as the full year of 23; 2) The implant business achieved revenue of 479 million yuan (+7.0%), the 24Q1 implant business achieved revenue of 111 million yuan (+5.9%), and the 24Q1 implant business achieved 14,000 dental implants (+48%), mainly collecting implant brands. While the company's positive effects policy, it achieved price exchange volume to maintain steady revenue growth. When prices are comparable in 24 years, the implant business is expected to contribute more revenue growth; 3) orthodontic business is expected to contribute more revenue growth in 24 years; 3) orthodontic business is expected to contribute more revenue growth. Achieving revenue of 499 million yuan (-3.1%), we believe it was mainly due to structural changes, and the decline in the share of invisible orthodontics led to a decrease in customer unit prices.
Incremental opportunities: On the one hand, dandelions have maintained rapid growth and are expected to contribute more to performance in 24 years; on the other hand, the company's expansion outside the province is undergoing new experiments, which is expected to become a new driving force for the company's growth in the long run. 1) In '23, the Dandelion Branch achieved revenue of 590 million yuan (+46%), achieved a net profit margin of 3.5%, and the number of diagnoses and treatments was 790,000 (+62%). The Dandelion Branch maintained a rapid growth trend and is expected to contribute more performance after the 24-year policy is cleared; 2) In '23, the company started mergers and acquisitions outside the province and selected targets with stable profit contributions. It is expected to use capital advantages to incorporate more high-quality assets to provide a new driving force for the company's performance growth.
Profit forecast and investment suggestions: The company's fundamentals are stable, policy factors are basically clear, the Q1 dental implant growth rate is impressive, the Dandelion Branch's performance is improving steadily, and the overall revenue structure is stable. The company's net profit for 2024-2026 is estimated to be 581/7.00/838 million yuan, EPS is 1.81/2.18/2.61 yuan, and the current market value corresponding to PE is 34/28/23 times, respectively, maintaining the “increase” rating.
Risk warning: Risks such as loss of core doctors, falling short of expectations in consumption recovery, and increased competition.