3Q23 performance is slightly lower than market expectations.
The company announced third-quarter results: 1~3Q23 income 1.657 billion yuan, year-on-year + 10.5%; return to the mother net profit 563 million yuan, year-on-year + 1.1%; deducting non-return net profit 550 million yuan, + 3.1% year-on-year.
3Q23's single-quarter income was 690 million yuan, + 15.9% compared with the same period last year, and the net profit was 217 million yuan,-6.8% from the same period last year. After deducting the non-return net profit of 210 million yuan,-10.3% compared with the same period last year, the non-recurrent income is mainly government subsidy of 8 million yuan, and the performance is slightly lower than the market expectation.We judge that it is mainly affected by oral CBCT business and exchange losses. at the same time, we judge that the 3Q23 color sorter and industrial testing business perform well and contribute a larger part of the income growth.
Trend of development
The gross profit margin is flat and slightly higher than the previous month, and the exchange loss affects the net interest rate. The company's 3Q23 gross profit margin is 51.9%, year-on-year-2.4ppt, which is slightly higher than 2Q23's 51.6%. We believe that the company's product market is more competitive, and the gross profit margin may remain at a high level for a long time. The sales / management / R & D / financial expense rates of 3Q23 are 10.5%, 3.4%, 5.4%, 0.6%, respectively, compared with the same period last year, indicating that sales and administrative expenses are well controlled. 3Q23's net interest rate is 31.4%, year-on-year-7.6ppt and month-on-month-8.05ppt. We judge that there are exchange gains in the same period last year and 2Q23, while 3Q23 is caused by exchange losses caused by the exchange rate.
Accounts receivable and cash flow from operating activities have both increased. As of the end of 3Q23, the company's inventory was 517 million yuan, + 7% year-on-year, and accounts receivable was 514 million yuan, an increase of 66% over the same period last year. The cash flow of 3Q23's operating activities is 216 million yuan, which is + 31% compared with the same period last year. We judge that it is due to the increase in cash received by the company's division in selling goods and the decrease in purchase payments.
Oral CBCT boom recovery, software and hardware to enhance the competitiveness of the company's products. We judge that the overall prosperity of the oral CBCT industry this year shows a quarterly recovery trend, we believe that the company's products hardware technology is excellent, while stepping up efforts to promote the "Meiya Meiya" cloud platform to enhance customer stickiness, as of the China report has been used by more than 1000 customers, which will help the company to further gain share in the market competition.
Profit forecast and valuation
Due to the lower-than-expected revenue of oral CBCT, we reduced the net profit of 2023 Universe by 4.6% to 774 million yuan / 917 million yuan in 2024. The current share price corresponds to a price-to-earnings ratio of 20.5 / 17.3 times 2024. To maintain an outperform industry rating, taking into account the downward valuation center of the industry, we lowered our target price by 15.4% to 23.35 yuan corresponding to 26.6 times 2023 price-to-earnings ratio and 22.5 times 2024 price-to-earnings ratio, which has 30.0% upside space compared with the current stock price.
Risk
Material prices rise, overseas market expansion is not smooth, exchange rate fluctuations risk, CBCT competition intensified.