As parents' attention to the oral health of children and adolescents increases, the early childhood correction market has ushered in rapid growth. Times Angel uses the latest AI technology to provide full-cycle support to doctors and patients.

The company further expands its market share and enhances the layout of the global invisible orthodontic service network through a “digitalization and globalization” dual-engine development strategy. (1) In the first half of 2024, the number of cases completed by the company in the Chinese market increased by 10.8% year-on-year, reaching about 95,300 cases; (2) In the first half of 2024, the company made significant progress in the international market, successfully reaching thousands of dentists in more than 50 countries and regions around the world. The number of cases completed in the international market increased by 512.8%, accounting for 37.7% of the total number of cases achieved during the reporting period.

The company's gross margin increased significantly in the first half of 2024, mainly due to product structure optimization and cost control. (1) In the first half of 2024, the company's gross margin reached 62.4%, an increase of 3.1 percentage points from 59.3% in the same period in 2023. The increase in gross margin was mainly due to lower unit costs of invisible correction solutions and economies of scale brought about by international business expansion; (2) The gross margin of invisible correction solutions increased from 61.7% in the first half of 2023 to 65.0% in the first half of 2024.

Expense rates increased during this period, mainly due to international business expansion and increased marketing investment. (1) The company's sales and marketing expenses reached 0.343 billion yuan (yoy +68.1%), mainly due to the increase in marketing expenses due to international business expansion. By increasing its marketing efforts, the company further increased its brand awareness and market share, especially its investment in the international market; (2) administrative expenses reached 0.158 billion yuan (yoy +30.9%), mainly due to increased management costs due to business expansion; (3) R&D expenses were 74.9 million yuan (yoy -13.0%), mainly due to improved R&D efficiency and phased completion of some R&D projects, accounting for 8.7% of total revenue.

The company continues to cultivate in the international market, further enhancing its brand influence and market share through localized operations and academic promotion. (1) In March 2024, the company held the first “European Age Angel Academic Forum” in Spain to discuss the clinical application and development of invisible orthodontics technology, which attracted the participation of more than 200 orthodontists; (2) In May 2024, at the 124th American Association of Orthodontists (AAO), American orthodontic opinion leaders shared the differentiated features of the company's products through the company's patient cases for the first time; (3) In the Asia-Pacific market, the company further covered countries such as Malaysia and Thailand through a combination of local business teams and regional dealer networks; ( 4) In the Brazilian market, the company strongly supports the growth of its own brand “Self” by empowering Aditek in medical design, intelligent manufacturing, etc., and is preparing for the official launch of the “Time Angel” product line. In the future, it will meet the diversified needs of the local market in the form of the “Self” + “Time Angel” brand.

As parents' attention to the oral health of children and adolescents increases, the early childhood correction market has ushered in rapid growth. According to the company's official public platform on December 26, since pioneering the launch of the first early correction solution in China in 2018, Times Angel has continuously improved the layout in the field of early correction, pioneered the concept of “three dimensional integration of dental bone muscle”, and achieved an accurate response to different stages of correction needs under the guiding philosophy of age-specific treatment, achieving a leading advantage in terms of cumulative number of cases; at the same time, adhering to the concept of “companion service”, Times Angel has used the latest AI technology to provide full-cycle support to doctors and patients.

According to Insight Consulting data, from 2020 to 2023, the compound annual growth rate of children's invisible orthodontic cases in China and the compound annual growth rate of the market size in terms of terminal prices all exceeded 60%. Compared with the Chinese market, the penetration rate of orthodontic treatment for children and adolescents in the US is higher. According to US MEPS (MedicalExpenditure Panel Survey) data, in 2019, 10.9% of children under 18 in the US were receiving various types of orthodontic treatment; according to estimates, this figure in China was about 1%-2% during the same period, and the gap between the two indicates broad room for future growth in the Chinese market.

Maintain an “overweight” investment rating. We are optimistic about the company's differentiated product matrix and the company's firm promotion of the two major strategies of digitalization and globalization. We expect the company's adjusted net profit for 2024-2026 to be 0.116/0.192/0.352 billion yuan, a year-on-year growth rate of -35%/66%/83%, corresponding to PE of 83.5/50.5/27.5 times, maintaining an “increase” investment rating.

Risk warning: Overseas business expansion falls short of expectations, risk of changes in the domestic market competition pattern, consumer medical demand recovery falls short of expectations, etc.