Needham:牙科市场机会巨大 但短期或受高利率等宏观经济因素限制

Needham: The dental market has huge opportunities but may be limited in the short term by macroeconomic factors such as high interest rates

Zhitong Finance ·  11/20/2023 14:52

Investment bank Needham published a research report saying that although the dental products and equipment market seems to have huge opportunities, macroeconomic factors such as high interest rates and fluctuations in consumer spending may limit the growth of this market in the short term.

The Zhitong Finance App learned that investment bank Needham published a research report saying that although there seem to be huge opportunities in the dental products and equipment market, macroeconomic factors such as high interest rates and fluctuations in consumer spending may limit the growth of this market in the short term.

Needham said the current size of the dental market is about 30 billion US dollars and is expected to grow at a medium single digit rate, mainly driven by demand in emerging categories such as intraoral scanners, computer-aided design and manufacturing, affordable implants, and transparent braces.

The growth rate for the core dental category is expected to be in low single digits. Core categories include endodontic/prosthetic products, traditional 2D/3D imaging equipment, surgical supplies, implants, and orthodontic brackets and wire.

As potential dental patients currently only make up a small portion, future growth is likely to be accelerated by greater penetration. Needham notes, for example, that about 4 billion people around the world have missing teeth, yet less than 1% have had teeth filled. Similarly, about 5 billion people have dental and jaw deformities, of which more than 500 million can afford treatment, yet only about 20 million begin treatment each year.

Other potential drivers of growth include an aging population, increased access to care, increased interest in cosmetic dentistry, and customer consolidation through dental services.

Despite this, Needham notes, overall growth in the industry has slowed in recent months due to patients delaying or cancelling surgeries. While such delays may create a backlog of demand, a prolonged shortage of staff may limit recovery.

High interest rates have also dampened the incentive for dental institutions to buy new equipment. Needham said a May survey by the American Dental Association showed that about two-thirds of dental practitioners said they are unlikely to make large-scale purchases within the next six months.

Needham quoted Google search trends and said that in the past 90 days, demand for dental implants seemed to have weakened, but demand for endodontic treatments such as root canals remained stable. In the week of November 5 to 11, 81% of searches for dental implants were before the COVID-19 pandemic, while searches for root canals were 103%.

For this reason, Needham believes that XRAY.US (XRAY.US) is the company that best responds to this trend. The company's implant business accounts for only about 10% of its total revenue, while ZiMVie (ZIMV.US) and Envista (NVST.US) account for 32% and 40%, respectively. Meanwhile, the endodontic treatment and restorative treatment business, which includes root canals, accounts for about 30% of Dunsborough's revenue and 13% of Envista's revenue. Needham rated Densberg as a “buy,” but rated EnVista and ZimVie as “hold.”

Finally, Needham pointed out that while the valuation of the dental industry seems “attractive,” macroeconomic factors may limit the expansion of the price-earnings ratio in the short term. However, “when recovery takes shape, we believe the dental industry's price-earnings ratio may expand meaningfully and relatively.”

Disclaimer: This content is for informational and educational purposes only and does not constitute a recommendation or endorsement of any specific investment or investment strategy. Read more
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