Performance summary: The company released its 2024 quarterly report and 2023 annual report. In the first quarter of 2024, revenue of 710 million yuan (+5%) was achieved, net profit attributable to mother was 170 million yuan (+2.5%), or approximately 170 million yuan (+4.2%) after deduction.
In 2023, the company achieved revenue of 2.85 billion yuan (+4.7%), net profit attributable to mother of 500 million yuan (-8.7%), and about 480 million yuan (-8.4%) after deduction.
The 23-year results are under pressure, and the 24-year Q1 results are in line with expectations. The company's revenue in 2023 increased 4.7% year-on-year, and the net profit growth rate was -6.1%. In the first quarter of '24, revenue grew by 5%, and net profit grew by 3.2%. 2023 Company Implantation Revenue (+7%); Orthodontic Revenue (-3.14%); Pediatric Revenue (+2.9%); Restoration Revenue (+6.7%); Large Comprehensive Revenue (+8.3%). Performance was under pressure in 23 years due to weak consumption and dental implant collection policies.
As planting projects were affected by collection and gradually scaled up, performance gradually recovered.
Management expenses increased with the establishment of new hospitals, and the decline in net interest rates for cost reduction and efficiency narrowed. The company's sales expense ratio in 2023 was 1%, the same as in 2022. The management expense ratio was 10.9% (+0.38pp); the sales and management expenses ratio for the first quarter of 2024 was 1% (+0.13pp) and 10.1% (+0.15pp), respectively. The increase in sales expenses is mainly due to increased investment in dental popularization and publicity in newly built and existing hospitals. The increase in management expenses is mainly due to personnel, depreciation and amortization of newly built hospitals. Net interest rates for the first quarter of 2023 and 2024 were 20.3% (-2.33pp) and 28.8% (-0.5pp), respectively. The company maintained reasonable control over operating costs, kept expenses low, and the decline in net interest rates narrowed.
Pay attention to implant collection and increase market share in response to industry policies. In 2023, the company's dental implant business revenue was 480 million yuan, accounting for 17.8%; it planted more than 53,000 implants, an increase of 47% over the previous year. The company introduced a low-cost implant business to patients, promoted the concept of high school and low dental supermarkets, and increased its market share. At the same time, the dental implant fee system was adjusted, and the three members of the Regional General Hospital cooperated with the Platform Operation Department to carry out the implant season project to improve the quality of medical services when there are no significant price differences in the dental industry.
Profit forecast and investment advice: Net profit due to mother for 2024-2026 is estimated to be 620 million yuan, 760 million yuan and 960 million yuan, respectively, and EPS is 1.94 yuan, 2.38 yuan, and 2.99 yuan respectively. According to the industry average valuation, leading companies are expected to continue to expand due to the risk of falling customer unit prices due to the collection of dental implants in the dental industry and the low market concentration in the dental industry. Furthermore, the stable operation of the company is expected to continue to improve, and plans to continue to expand outside the province through mergers and acquisitions in the future. There is a possibility of a reversal in performance. We believe that the company can be given a higher valuation than the industry average and maintain a “buy” rating.
Risk warning: hospital revenue or failure to meet expectations; industry policy risk; medical malpractice risk.