Introduction to this report:
In the short term, due to the downturn in consumption and the collection of dental implants, the revenue growth rate increased slightly, and the performance was in line with expectations. The company actively expands and develops the Dandelion Branch and further explores new models of mergers, acquisitions and franchise expansion. Maintain an increase in holdings rating.
Key points of investment:
Maintain an increase in holdings rating. Considering the pace of recovery in consumer medicine, the 2024-2025 EPS forecast was lowered to 1.81/2.09 yuan (originally 2.19/2.68 yuan), and the 2026 EPS forecast was 2.37 yuan. Referring to comparable company valuations, the 2024 PE 41 X was given, and the target price was lowered to 74.21 yuan to maintain the increase rating.
The performance was in line with expectations. In 2023, the company achieved revenue of 2,847 million yuan (+4.70%), net profit to mother of 500 million yuan (-8.72%), after deducting non-net profit of 481 million yuan (-8.37%). In Q1 2024, we achieved revenue of 708 million yuan (+5.03%), net profit to mother of 173 million yuan (+2.51%), after deducting non-net profit of 170 million yuan (+4.20%). The results were basically in line with expectations.
Dental implants were collected and released after implementation, and consumption projects were under pressure in the short term. In '23, 3000 dental chairs were opened (+11%), and the number of dental clinics was 3.3533 million (+14%). The average customer unit price was 802 yuan (-8%) due to consumption downgrades. Among them, the revenue from the implant business was 479 million yuan (+6.95%). After the implementation of the collection policy in April, there were more than 53,000 dental implants (+47%) in 23 years, and volume growth is expected to continue in the future. Consumer dental projects are under pressure in the short term. In 23 years, the orthodontic/pediatrician/restoration/comprehensive business revenue was 4.99/4.99/4.56/756 million yuan (-3.14%/+2.90%/+6.72%/+8.34%), respectively.
Actively develop the Dandelion Branch and explore new models of franchise expansion. 41 dandelion branches were opened in '23, and 8 new ones are planned to be added in '24. Some are under construction or site selection has already been completed. The branch office is developing well.
50% of dandelions are profitable, 50% are still in the incubation and cultivation period, and the overall pace is in line with expectations. Furthermore, the new Chengxi building is expected to be completed and delivered by the end of '24, adding 100-150 dental chairs; Binjiang is expected to be delivered for trial operation in May. The company built a platform for dental hospitals, deepened its strategy in Zhejiang Province, broadened its national strategy, and further explored and implemented mergers, acquisitions and alliances with high-quality targets.
Risk warning: Consumer health recovery fell short of expectations, and hospital expansion fell short of expectations.