“Stocks are voting machines in the short term, and weighing machines in the long term” is a classic phrase of Graham, the founder of value investing. In other words, for high-quality stocks, no one can fully predict short-term stock market performance; just wait patiently for the market's weighing machine to take effect and wait for the flowers to blossom. For example, the domestic leader in invisible orthodontics, the Angel of Time (06699), after being dormant for a short time, finally raised its eyebrows in the capital market.
On March 20, Times Angel surged 15.36%, with a turnover of HK$210 million and a total market value of about HK$12.699 billion. In fact, since February, the company's stock price has continued to rebound, with a cumulative increase of nearly 40%, which has attracted the attention of investment banks and the market.
The main reason for the strong stock price performance of Times Angel is solid fundamentals. According to the 2023 financial report, during the period, the company's revenue was $1,476 million (unit: RMB, same below), up 16.24% year on year; gross profit was approximately $921 million, up 17.2% year on year; it is proposed to pay a special final dividend of HK$1.1 per share.
The Zhitong Finance App believes that with excellent digital orthodontic diagnosis and treatment links, professional medical design services, intelligent manufacturing, and collaborative expansion at home and abroad, Times Angel continues to build core competitiveness. The long-term strategy is clear, the business has maintained steady growth, the scale advantage is further expanded, and the room for growth can be expected.
Continue to increase global layout, improve two-wheel drive performance
In 2023, Time Angel will continue to advance the development strategy of “digitalization and globalization”, and the overall business is steadily improving, and it occupies a leading position in the market. During the period, the total number of cases where the company achieved invisible correction was 245,000, an increase of 33.2% over the previous year. The number of business cases in China was 212,000, an increase of 15.2% over the previous year; the number of cases reached in the international market reached 33,000, which more than doubled in the second half of the year.
As the basic market of the angels of the times, domestic business has shown strong growth resilience. During the period, the company's domestic business continued to lead the market, maintained steady growth in terms of achieving cases, revenue and profits, and continued to rank first in mainland China's market share.
As reflected in performance, the total revenue of the market was 1,331 million yuan, up about 5.5% year on year; adjusted profit was 256 million yuan, up 29.9% year on year.
While deeply involved in the Chinese market, Time Angel officially began commercializing international business more than a year ago, using this as a new important strategy. According to financial reports, in 2023, Time Angel officially entered the “global organization+localized operation” stage.
The Zhitong Finance App believes that Time Angel can be expected to successfully expand overseas markets.
On the one hand, Times Angel has built a local business team with rich experience in the orthodontic market in Europe, Australia, New Zealand, North America, etc., and launched innovative products that meet local needs, which have been recognized by international professional orthodontic KOLs. For an industry such as invisible orthodontics, which requires a high level of local service, building trust and brand reputation requires significant upfront investment. The Angel of Time has undoubtedly chosen the difficult and correct path, which is why the global business has taken a quick start once it has passed its infancy.
On the other hand, Time Angel acquired 51% of Brazilian orthodontic leader Aditek to enter the Brazilian market. Brazil is the third largest orthodontic market in the world, and the space is huge. Times Angel is expected not only to use Aditek to enter the Brazilian market and radiate the South American and global markets, but also export digital technology and intelligent manufacturing technology to Aditek, thus having two major production centers in China and South America.
In 2023, the international business achieved an important breakthrough in commercialization as the second growth curve, with international market revenue of 145 million yuan. This is just the beginning. At the current rate of growth, the number of international cases can be expected to increase in 2024.
Digitalization and medical capabilities underlie high growth dividends in domestic and foreign markets
In the Chinese market, Time Angel has been at the top of the market for three years. This is closely related to the maturity and rational development of the entire orthodontic market environment.
Product strength, medical service capability, and brand are becoming key words in the entire invisible orthodontic industry chain. Whether on the doctor side or the patient side, more and more attention is being paid to product quality, medical plan design quality, and long-term reliability rather than marketing gimmicks. Under the consideration of “word-of-mouth protection,” leading brands are increasingly becoming the preferred choice for doctors, institutions and patients.
Time Angel's ability to continue to lead the industry in domestic business also confirms its comprehensive strength. According to the Zhitong Finance App, the core competitiveness of Times Angel comes from digital innovation, medical service capabilities, and intelligent manufacturing barriers.
First, the company focuses on digital innovation research and development. In 2023, Era Angel invested 174 million yuan in R&D, accounting for 11.8% of total revenue. R&D technology is transformed into industrial achievements, consolidating its core competitive advantage in the field of orthodontic technology. As of December 31, 2023, the company has registered 185 patents and 16 software copyrights.
Second, medical service capabilities, especially the quality of medical plan design. Times Angel has built the largest medical designer service team in Asia to respond to doctors' needs in a timely, stable and high-quality manner.
Third, intelligent manufacturing technology creates quality and production capacity barriers. By continuously improving the automation and intelligence of intelligent manufacturing plants, Times Angel continues to improve production efficiency. Every year, Times Angel can produce more than 40 million customized braces, and each pair of braces is unique. This has also become a solid support for global business. Around the world, it only takes an average of 8.5 working days from doctors' submission of orders to delivery of braces.
Under large-scale manufacturing, long-term production capacity is sufficient, unit production costs are expected to drop further, and profitability will gradually improve.
It should be pointed out that competition in the core city market tends to be intense, and the share of cases in the sinking market is expected to continue to rise. Times Angel uses high-quality products and services to meet consumers' orthodontic needs at high cost, which is expected to increase the penetration rate of the sinking market. Currently, the proportion of cases completed in the third and fourth tier markets of Times Angel is steadily increasing.
Overall, leading companies in the domestic invisible orthodontic market have strong competitive advantages in brand power and product strength, and have accumulated a rich number of cases in the domestic market. The competitive advantage of leading companies is expected to continue to strengthen, and the competitive pattern of the two strongest companies is expected to remain stable. In particular, all parties in the domestic invisible orthodontic industry will continue to be cautious about brand changes. As the brand leader, the product pipeline and technology platform layout are mature, and it is expected that they will still enjoy the growth dividends brought by strong product strength.
Two flowers bloom, one on each side. The advantages of the domestic market are prominent, and the growth potential of the international market should not be underestimated.
Looking ahead, international business has great potential and strong growth potential. Domestic and overseas markets are vast. In terms of retail sales revenue, the global orthodontic market increased from US$39.9 billion in 2015 to US$59.4 billion in 2020, with a compound annual growth rate of 8.3%, and is expected to reach US$116.4 billion by 2030. Times Angel has strong product strength to build a foundation. As overseas market layout is deepened, performance release can be expected to accelerate.
Looking at the global market, the number of institutions, doctors, and patients all have more room for transformation. The company seizes the initial maturity of overseas markets, and the long-term growth prospects are objective. Tohoku Securities expects the overseas market's contribution to match the domestic market by 2030.
In summary, Times Angel has built a solid foundation of brand strength and is expected to further increase its market share in the domestic market. On the other hand, the company has successfully built a high-tech barrier. Up to now, the company has achieved millions of cases, and the accumulation of a huge database has helped it expand overseas markets, and is optimistic that the company's overseas expansion has exceeded expectations. With the rapid increase in overseas productivity, contributing to the company's second growth curve, Times Angel's valuation level is expected to rise steadily.