Event

On March 29, 2022, the company issued an annual results announcement for 2021. In 2021, the company achieved an operating income of HK $2.955 billion, an increase of 34.9% over the same period last year, a gross profit of HK $1.551 billion, an increase of 42.3% over the same period last year, and a gross profit margin of 2.7% over the same period last year. This is mainly due to the increase in production capacity of the company's production team and the appreciation of foreign currencies against the Hong Kong dollar to offset the increase in production costs caused by COVID-19 's epidemic. In 2021, the company made a net profit of HK $361 million, an increase of 234.8 per cent over the same period last year.

Comment

Overall sales revenue hit a record high, with sustained and steady growth in all regions.

Driven by the epidemic in 2021, the company's sales orders and the number of new customers continued to increase. The overall sales revenue for the whole year reached a record high, with sales of 1.9996 million products, an increase of 25.3 percent over the same period last year. The average unit price was 1379 Hong Kong dollars, an increase of 5.4 percent over the same period last year. With the advantages of sales and distribution network, the company continued to grow steadily in major markets around the world, including sales revenue of HK $1.255 billion in Europe, an increase of 31.6% over the same period last year, HK $719 million in North America, an increase of 25.8% over the same period last year, and sales revenue of HK $699 million in Greater China, an increase of 32.3% over the same period last year. Sales in Australia and New Zealand reached HK $250 million, an increase of 19.1% over the same period last year.

The effect of digital transformation is prominent, and pay close attention to the opportunity of industry integration.

COVID-19 's epidemic situation has accelerated the elimination of small and medium-sized denture processing enterprises and the development of oral digitization, the application of internal oral scanners has greatly increased, and the company continues to grasp the growing demand for dental treatment. accelerate the transformation of dental digitization. In 2021, the number of digital cases solved by the company reached 3012, an increase of 183.2% over the same period last year. The company, as an industry leader, is expected to seize the opportunity of market integration and oral digital development. Provide the most advanced digital solutions for the dental field in the market, further enhance market share and customer stickiness.

Continuous improvement of operational efficiency and new increment of stealth correction products

The company's operating capacity continued to improve, with outstanding financial indicators. In 2021, the company achieved a gross profit margin of 52.3%, an increase of 2.5% over the same period last year; the ratio of R & D investment to sales reached 3%, an increase of 1% over the same period last year; and the net profit margin reached 12.2%, an increase of 7.3% over the same period last year. The net profit of the core business was HK $382 million, an increase of 70.5% over the same period last year. In 2021, the company's own invisibility correction product TrioClear achieved sales of 22 million Hong Kong dollars, an increase of 360.30% over the same period last year, becoming a new increase in performance.

Profit forecast and rating

The company's performance growth is in line with expectations, is expected to seize the industry digital development opportunities, performance to maintain steady growth. According to the company's annual report in 2021, the forecast of operating income for 2022-2023 is reduced from HK $3.7054.482 billion to HK $3.376 billion, and the operating income for 2024 is HK $4.619 billion; the net profit forecast is reduced from HK $563,000,000 to HK $388,000,000, and the net profit for 2024 is forecast to be HK $574 million. According to the situation of the comparable company, the company will be given 15 times PE in 2022, with a reasonable valuation of HK $5.823 billion and a corresponding target price of HK $6.08, maintaining a "buy" rating.

Risk tips: global economic and transnational operational risks; recurrent epidemic risks; centralized risks in production facilities; exchange rate risks