MEYER OPTOELECTRONIC(002690):ORDERS DURING GROUP-BUYING FESTIVAL BEAT;DOWNSTREAM DEMAND RECOVERING

类别:公司 机构:中国国际金融股份有限公司 研究员:Ziding ZHANG/Xianfan CHEN/Xinyang LI 日期:2022-06-15

What's new

    Recently, Meyer Optoelectronic sold 1,519 cone beam computed tomography (CBCT) units as part of an online group-buying festival held for the firm’s 10th anniversary, beating our expectations. We attribute the strong sales to a recovery in demand from dental clinics, boosted by the resumption of work.

    Comments

    CBCT group-buying orders hit record high, showing strong downstream demand. The firm secured orders for 1,519 units in the group buying festival (compared with 1,751 units in 2019, 1,625 in 2020, and 2,177 in 2021). Orders secured during the buying festival are the same as about 70% of 2021's full-year sales. CBCT demand has been weak since 1Q22, as downstream demand was dampened by COVID-19 resurgences in Shenzhen, Shanghai, and other cities. We believe the higher-than-expected group-buying orders indicate demand has returned to rapid growth, since capital expenditures at dental clinics rise alongside work and production resumptions.

    We are optimistic about digitalization in the dental industry in long term. We believe there is much room for the penetration of CBCT in China. We expect the firm to gain more market share by leveraging its product reputation, R&D capabilities in hardware and software, and strong dental clinic resources. Meanwhile, we think its CT equipment has the potential to enter overseas markets. We believe the firm will further promote intraoral scanners and CT equipment for ear-nose-throat (ENT), and it is engaging in R&D for mobile CT products. In our view, the firm may grow into a digital dental solution provider with a well-organized product portfolio.

    Temporary external pressure eases; we expect net profit recovery. We believe the external tensions the firm has faced YTD have eased marginally. First, China’s regional COVID-19 resurgence is easing, resulting in an orderly work resumption. Second, the stronger depreciation of the renminbi against the US dollar benefited the company's exports in April-May. Third, freight rates fell from 1Q22. We expect the improved external environment to bring recoveries in CT demand, export demand, and net profit margin.

    Financials and valuation

    We maintain our earnings forecasts for 2022 of Rmb640mn and for 2023 of Rmb781mn. The stock is trading at 26.6x 2022e and 21.8x 2023e P/E. We maintain our target price (backward adjusted) at Rmb29.03, implying 40x 2022e P/E, offering 50.5% upside. Maintain OUTPERFORM.

    Risks

    COVID-19 lingers; increasing raw material prices and freight rates; intensifying competition in CT business; new products disappoint.