Incidents:

The company released its semi-annual report. 2024H1 achieved operating income of 0.41 billion yuan, up 17% year on year; net profit to mother of 0.077 billion yuan, up 21% year on year; net profit after deducting 0.077 billion yuan, up 36.5% year on year; revenue of 0.24 billion yuan in single quarter, up 15% year on year and 38% month on month; net profit to mother of 0.053 billion yuan, up 15% year on year and 130% month on month.

Profitability has improved markedly. In the first half of the year, the company's gross profit margin was 52.7%, up about 4.0 percentage points year on year. Single 24Q2 gross margin was 53.5%, up 3.6 percentage points year on year and 2.0 percentage points month on month. Among them, in the first half of the year, the gross margin of dental repair materials increased from 57.2% in the same period last year to 60.4%, and the gross margin of equipment increased significantly from 25.89% to 29.27% in the same period last year, and profitability increased 21%/10%/4% year-on-year respectively; financial expenses were -2.85 million yuan, a decrease of nearly 10 million yuan compared to the same period last year, mainly due to a decrease in foreign currency asset exchange earnings; ultimately, net profit of 0.077 billion yuan, up 21% year on year Excluding exchange factors, the growth rate was faster.

Improve the full upstream layout of the dental industry chain, and growth can be expected

1) Expansion of implant business: The company completed the acquisition of Korea's Worland Holdings in May 2024 and is actively expanding the planting market and channel construction in China. It is committed to further improving the service quality of the planting business, strengthening core product technology and brand awareness, and promoting the long-term orderly development of the implant business; 2) Chairside equipment achieved high growth: during the reporting period, the company launched a variety of new materials and equipment products. Revenue from Editt's chair-side instant repair system business increased 53.23% over the same period last year. By using equipment such as intraoral scanning equipment, digital restoration design software (CAD), small CNC cutting equipment (CAM), and rapid sintering, the Editt Chairside Immediate Repair System can complete the design and manufacture of conventional all-porcelain or resin restorations in a single diagnosis and treatment in the clinic.

Profit forecasting and valuation

The company's revenue for 2024-2026 is expected to be 0.94, 1.14, and 1.46 billion yuan, respectively, up 20%, 22%, and 28% year-on-year, with a compound growth rate of 23%; net profit to mother is 0.18, 0.24, and 0.31 billion yuan, respectively, up 25%, 29%, and 30% year-on-year, with a compound growth rate of 28%. The corresponding PE was 23, 18, and 14 times, respectively, maintaining a “buy” rating.

Risk warning: international trade risk; risk of fund-raising projects falling short of expectations; risk of policy changes in the healthcare industry.