Matters:

The company released its 2024 three-quarter report: 2024Q1-Q3 achieved revenue of 2.233 billion yuan (+2.21%), net profit of 0.498 billion yuan (-2.63%) to mother, deducting 0.494 billion yuan (-0.47%) of non-net profit. The third quarter achieved revenue of 0.823 billion yuan (+0.04%), net profit of 0.188 billion yuan (-9.1%), and deducted non-net profit of 0.189 billion yuan (-7.37%).

Ping An's point of view:

Performance is under pressure, waiting to be fixed: weak consumption in recent years, compounded by the impact of dental implant collection policies, the company's average customer unit price has declined, and revenue growth has slowed. Judging from the 24Q3 data alone, due to the high base of 23Q3, the growth rate slowed further, and the profit side grew negatively year-on-year. Recently, macroeconomic stimulus policies have been frequent, and it may be possible to wait for the company's performance to recover.

Profit margins declined slightly, and the expense side remained stable. Affected by factors such as the decline in the average customer unit price, 24Q1-Q3, the company's gross profit margin was 41.82%, down 0.76pp year on year, and the net profit margin was 26.95%, down 1.06pp year on year. The cost ratio remained stable. The 24Q1-Q3 sales expenses ratio was 1.16%, up 0.24pp year on year, and the management fee ratio was 8.96%, up 0.13pp year on year, and basically remained stable.

The dandelion plan is progressing steadily, laying the foundation for long-term growth. In 2024, the company will continue to advance the dandelion program. As more branches pass through the cultivation period, the company's profit side will usher in new growth points.

Maintaining the “Recommended” rating: Considering changes in the economic environment, we adjusted the company's profit forecast. The company's net profit for 24-26 is 0.571 billion yuan, 0.674 billion yuan, and 785 million yuan, respectively (the original forecast net profit for 2024-2026 was 0.589 billion yuan, 0.72 billion yuan, and 880 million yuan). In the next 3-5 years, Tongze Medical will accelerate the opening of new hospitals to seize the Zhejiang dental market and further deepen the field of orthodontics and dental implants. The company has been developing for a long time and maintains a “recommended” rating.

Risk warning: Risk of industry growth falling short of expectations; risk of hospital acquisitions falling short of expectations; spread of pandemic diseases, which will have a negative impact on the industry.