TC Medical(600763) Huaan Securities·2024-09-27 06:57Investment Rating - The report assigns a "Buy" rating for the company, Tongce Medical [1][3]. Core Views - Tongce Medical is a leading private dental service provider in China, with a robust long-term development outlook as it navigates policy disruptions [1][3]. - The company has established a regional chain of dental services through a model of regional general hospitals and branch clinics, with ongoing expansion efforts [1][3]. - The dental service market in China is experiencing steady growth, driven by increasing healthcare spending and an aging population, which is expected to sustain demand for dental implants [2][3]. Summary by Sections Company Overview - Tongce Medical has a strong presence in the dental service sector, operating 84 dental institutions with 3,037 dental chairs as of mid-2024 [1][9]. - The company has a stable and reasonable shareholding structure, with a management team rich in talent and experience [1][16]. Market Demand - The dental healthcare market is expanding rapidly, with orthodontic cases increasing from 1.63 million in 2015 to 3.74 million in 2023, indicating a growing demand among adults aged 24-34 [2][3]. - The company is well-positioned to leverage its scale and brand influence to gain a competitive advantage in the long term [2][3]. Operational Strategy - The "general hospital + branch" model is maturing, with a focus on deepening operations in Zhejiang province while exploring opportunities for expansion in other provinces [1][3]. - The company has initiated the "Dandelion Plan" to penetrate lower-tier markets, with 41 Dandelion clinics opened by the end of 2023 and plans for further expansion [1][3]. Financial Performance - In the first half of 2024, the company achieved a revenue of 1.411 billion yuan, a year-on-year increase of 3.52%, and a net profit of 310 million yuan, up 1.77% [1][19]. - Revenue projections for 2024-2026 are 2.949 billion, 3.322 billion, and 3.676 billion yuan, with corresponding net profits of 568 million, 665 million, and 762 million yuan, reflecting a positive growth trajectory [3][4]. Cost Management - The company has made progress in cost control, with a reduction in the proportion of medical material costs and an emphasis on optimizing supply chain management [1][26]. - The overall gross margin has shown signs of recovery, with a gross margin of 40.83% in the first half of 2024, up from 38.53% in 2023 [1][30].