Incidents:

On August 22, 2024, the company released its 2024 semi-annual report. 2024H1 achieved operating income of 0.862 billion yuan, a year-on-year increase of 39.8%; net profit to mother was 22.479 million yuan, a year-on-year decrease of 30.4%.

Among them, the Chinese market achieved revenue of 0.633 billion yuan, an increase of 10.1% year on year; the international market achieved revenue of 0.228 billion yuan, an increase of 452.5% year on year.

Comment:

The orthodontic solutions sector showed steady performance, with strong growth in the sales product business. 2024H1 achieved revenue of 0.862 billion yuan, an increase of 39.8% over the previous year. Among them, orthodontic solutions achieved revenue of 0.6 billion yuan, an increase of 8.47% over the previous year, due to the increase in the product line involved, the complexity of related treatment plans, the specific needs of dentists, and the company's production capacity in the Chinese market; the sales product business achieved revenue of 0.252 billion yuan, an increase of 363.1% over the previous year. Brace braces sold in the international market and Other products and sales of MOOELI and the Times Angel Dental Care Orthodontic Research Series led to strong international business growth; other services achieved revenue of 9.016 million yuan, an increase of 4.92% over the previous year.

Domestic business continues to lead the way, and overseas development adapts to local conditions

2024H1 achieved a gross profit margin of 62.4%, a year-on-year increase of 3.1 pct; achieved a net profit margin of 1.7%, a year-on-year decrease of 3.1 pct. The 2024H1 company's expense ratio during the period was 69.51%, a year-on-year decrease of 6.81 pcts. Among them, the sales expense ratio was 39.83%, up 6.72 pct year on year; the management expense ratio was 27.02%, down 6.53 pct year on year; and the R&D expense ratio was 1.0%, which was basically the same year on year. The total number of cases completed by the 2024H1 company was about 152,900, an increase of 60.3% over the previous year. Among them, the company's China business achieved 95,300 cases, an increase of 10.8% over the previous year, maintaining a leading market share in the Chinese market; the coverage rate of dental clinics at various city levels continued to increase; and the number of completed cases in the international business adapted to local conditions, reaching 57,600 cases, accounting for 37.7% of the total number of cases.

Deeply involved in full-process digital orthodontic solutions and continuously enhance product competitiveness 2024H1 continues to apply computer technology to the entire digital orthodontic process, continuously iterates on the “iOrtho Digital Orthodontics Intelligent Service Platform”, and successively launches digital tools to meet the continuously upgraded and personalized needs of dentists and patients. In terms of adult orthodontics, the company launched a new occlusal tool “Angel Jaw Pad” and “New A6 Jaw Plate” to reduce doctors' chair-side operation time and enhance patients' experience of wearing the brace and the therapeutic effect of clinical application; in terms of early correction, the company implemented the concept of “treat by age” and “treat with symptoms” to select the appropriate correction timing through comprehensive evaluation of age, dental age and bone age; Enrich the children's product line and launch the “KiD Max” sub-product line, A6 leading jaw solution, and “KiD” invisible front traction solutions “Smart Escort” Program Wait for an exclusive design plan for children and teenagers.

Strong growth in international business and continued expansion of market scope

In the international market, the company adapts to local conditions under the “global organization+localized operation” strategy and continues to deeply cultivate strategic markets such as Europe, North America, Asia Pacific and Brazil. Benefiting from the advantages of localization, high-quality medical design solutions and clinical medical support, and stable and efficient delivery capabilities, the company has reached thousands of dentists in more than 50 countries and regions around the world. 2024H1 achieved 0.0576 million cases in its international business, accounting for a rapid increase of 37.7% of the total number of cases.

Profit forecast: We expect the company's 2024-2026 revenue to be 1.776/2.184/2.685 billion yuan (2026 revenue adjusted from 2.693 billion yuan to 2.685 billion yuan). The reason for the reduction was due to fluctuations in overseas market revenue, and the estimated net profit to mother was 0.07/0.156/0.269 billion yuan, respectively (net profit to mother was adjusted from 0.257 billion yuan to 2026 0.269 billion yuan). The reason for the increase was that sales expenses, etc. were adjusted according to changes in product sales, and the “buy” rating was maintained.

Risk warning: industry price competition intensifies; policy risks; overseas market promotion falls short of expectations; product channel promotion falls short of expectations