TC Medical(SH:600763) Soochow Securities·2024-05-31 08:30Investment Rating - The report maintains a "Buy" rating for the company [1][3]. Core Viewpoints - The company is a leading private dental service provider in Zhejiang Province, expanding its medical service network through a regional hospital and branch model. Short-term impacts from centralized procurement policies are expected to be absorbed, with growth in implant services anticipated. In the medium to long term, the company is expected to enter a harvest period as the expansion of branch hospitals slows, with steady growth in both branch and main hospital scales, and opportunities for market penetration in and outside the province [2][3]. - The dental sector has significant growth potential, driven by a large base of potential consumers and low treatment rates. The market for dental services in China is projected to grow to 383.7 billion yuan by 2028, with a compound annual growth rate (CAGR) of approximately 13% from 2024 to 2028. The penetration rate for dental implants in China is currently low compared to countries like South Korea, indicating substantial room for growth [2][3][36]. - The company has established a strong network of 84 medical institutions and 2,133 doctors, with a service area exceeding 250,000 square meters and 3,000 dental chairs. The main hospitals have a strong reputation and professional capabilities, forming a comprehensive service network across the province. The "Dandelion Plan" has accelerated market penetration, with about half of the opened branch hospitals achieving profitability by early 2024 [2][3][20]. Summary by Sections 1. Company Overview - The company has evolved from acquiring Hangzhou Dental Hospital in 2006 to becoming a leading private dental group in Zhejiang, with a focus on expanding both within the province and beyond. As of the end of 2023, the company reported a revenue of 7.08 billion yuan, a 5.03% increase year-on-year, and a net profit of 1.73 billion yuan, a 2.51% increase [13][18]. 2. Market Potential - The dental service market in China is expected to grow significantly, with the market size increasing from 205.2 billion yuan in 2023 to an estimated 383.7 billion yuan by 2028. The growth is supported by factors such as an aging population, rising income levels, and increasing awareness of dental health [36][38]. 3. Business Model and Expansion - The company operates a "main hospital + branch" model, which has proven effective in expanding its market presence. The profitability cycle for branch hospitals is shortening, and the company is exploring acquisition and franchise models for further expansion outside Zhejiang [2][3][20]. 4. Financial Performance - The company forecasts total revenue of 32.41 billion yuan for 2024, 38.33 billion yuan for 2025, and 45.15 billion yuan for 2026, with corresponding net profits of 6.0 billion yuan, 7.5 billion yuan, and 9.4 billion yuan. The current valuation corresponds to P/E ratios of 32, 25, and 21 times for the respective years [3][18].