Revenue for fiscal year 2022 meets our expectations
Riel Group announced its results for fiscal year 2022: revenue for fiscal year 2022 was 1.624 billion yuan, + 7.2% compared with the same period last year, which is in line with our expectations. The net profit of homing is-701 million yuan, corresponding to earnings per share of-1.21 yuan; the adjusted profit is 66 million yuan, + 17.7% compared with the same period last year, slightly exceeding our expectations, mainly due to the change in the fair value of convertible redeemable preferred shares slightly exceeding our expectations.
Trend of development
In fiscal year 2022, the company opened five new clinics and upgraded three clinics. As of March 31, 2022, the company has 105 oral clinics and 7 hospitals in 15 cities in China, of which Ruier Dentistry has 51 clinics with 482 dental chairs; Ruitai Stomatology has 7 hospitals and 54 clinics with 732 dental chairs.
The company announced that six clinics and two hospitals are still under construction, and the company expects to add more than 160 dental chairs. The company plans to continue to open more clinics and hospitals in China's first-and second-tier cities in the future to expand its business.
Revenue from single-tooth chairs increased in fiscal 2022 compared with the same period last year, and gross profit margin decreased slightly due to the impact of new stores. In fiscal year 2022, 1) the income of Ruier Dentistry reached 832 million yuan, accounting for 51.2%, an increase of 8.3% over the same period last year, and the income of a single dental chair reached 1.69 million yuan, an increase of 6.5% over the same period last year. 2) Ruitai realized income of 792 million yuan, accounting for 48.8%, an increase of 5.9% over the same period last year, and the income of a single dental chair reached 1.06 million yuan, an increase of 2.9% over the same period last year. 3) the income of orthodontics was 366 million yuan, accounting for 22.6%, an increase of 7.0% over the same period last year. 4) the income of orthodontics was 353 million yuan, accounting for 21.7%, an increase of 17.9% over the same period last year. In fiscal year 2022, the company's overall gross profit margin was 20.7%, a year-on-year decline of 3.3ppt, mainly due to 1) the cancellation of social security provident fund relief policy, and 2) the opening of new clinics and hospitals are still in a period of expansion. We believe that with the collaborative operation of Ruier Dentistry and Ruitai Stomatology, the company is expected to serve customers with different economic and regional backgrounds in the future, give full play to its core advantages of "talent + brand + system" and improve operational efficiency.
The number of patients received by the company and the revisit rate increased compared with the same period last year. In fiscal year 2022, the total number of patients received by the company reached 1.56 million, an increase of 13.7% over the same period last year. As of March 31, 2022, the company's customer revisit rate (that is, the proportion of patients who chose the company clinic or hospital to correct again six months after their first visit, excluding follow-up consultations for the same treatment) was 48.6%, an increase of 2.8ppt over the same period last year. In addition, the company has 883 full-time dentists with an average industry experience of 10.6 years, with 31.4%, 11.1% and 5.1% of dentists with more than 5, 10 and 15 years of employment, respectively. The company expects to continue to grasp medical quality management and strengthen personnel training in the future.
Profit forecast and valuation
We maintained our adjusted net profit for fiscal years 2023 and 2024 unchanged at 170 million yuan and 205 million yuan respectively, up 158.3% and 20.8% respectively over the same period last year. We maintain an outperform industry rating and a target price of HK $15.44 (based on DCF valuation), which is 26.4% upside from the current share price.
Risk
COVID-19 's epidemic is repeated; regulatory and payment policies exceed expectations; new hospitals and clinics do not perform as expected; dentists outflow more than expected; brand image is damaged.