CGSI Reiterates “Buy” Rating on Modern Dental (03600HK), Ups Target Price to HK$5.88

In a recent report by CGS International, they have reaffirmed the “Buy” rating on Modern Dental (03600HK), raised the target price to HK$5.88. According to the report, FY23 net profit increased 83% yoy to HK$404m due to strong revenue recovery in all markets. They expect Europe and Australia to drive FY24F revenue growth as the firm maintains its market dominance in the dentist market's digitalisation trend.

CGSI anticipates Modern Dental to maintain a moderate 12% revenue growth in FY24F, primary driven by Europe and Australia markets due to its growing customer base (dentists) as the company is able to offer premium and consistent quality products. Capitalising on dental prosthesis's growing digitisation, it is expected margin expansion to continue due to rising digital cases. Modern Dental increased its production capacity by over 50% in FY22-23 by expanding capacity of its Dongguan laboratory and setting up new facilities in Vietnam. Due to enhanced production capability, CGSI believes Modern Dental should improve production efficiency and decrease product costs in FY24F.

CGSI believes the company would further gain global market share in dental prosthetics. FY2024-FY2026 revenue forecasts are HK$3,547m/4,030m/4,577m, respectively; net profit forecasts are HK$473.5m/560.1m/641.7m, respectively; EPS forecasts are HK$0.50/0.59/0.67, respectively. The target price increased to HK$5.88 based on 10x CY25F P/E, reiterated “Add” on Modern Dental.

*Disclaimer: The views and recommendations given in this article are those of analysts. For details, please refer to the full report.