Image source @ Visual China
Text | Finance Qiguan
"The barn is honest and knows the etiquette, and the food and clothing are sufficient and the honor and disgrace are known."
As early as the Spring and Autumn Period, the pipe was ordered in an echelon of human needs.
The Ming Dynasty dialect also circulated the saying "full of warmth and lust", all of which tell the same truth: survival/stability is the first need, and only after the first need is basically satisfied, people will further develop upwards.
Recently, the capital market has shown a clear structural tendency, giving extremely high weight to the growth factor.
In such an atmosphere, new energy vehicles, medicine, cxo and other high-prosperity, high-growth rate industries ushered in a great pursuit.
Among them, the medical beauty plate directly linked to the "beauty economy" was also briefly "lucky", and then staged a rush back down.
Putting aside the behavior of free money, what is supporting the ups and downs of the sector?
Peace dividend, prosperity dividend.
Whether you are optimistic about these two macro indices directly determines your confidence in the stock index of the medical aesthetic industry.
On June 16, Angelalign, the invisible brace orthodontic leader, will officially land on the Hong Kong Stock Exchange.
The IPO was priced at an upper limit of HK$173 per share, with a first lot of 200 shares, and an entry fee of about RMB34,948.66, surpassing the 32,726.49 yuan of Zai Ding Pharmaceutical (09,688), which was listed on 28 September 2020, becoming the most expensive new stock in the history of Hong Kong's IPO market.
Moreover, the IPO stage does not introduce any cornerstone investment, which can be said to be very "confident".
In terms of market capitalization space, the current value of the stock market is HK$28.6 billion.
According to the agency's calculations, with the relative valuation method, tongce medical (pe: 188.42) in the benchmark dental industry is priced at 100 times pe, and after two years, the adjusted net profit of 2022e is 430 million yuan, and it is speculated that the expected valuation is 52.1 billion Hong Kong dollars, which still has nearly doubled upside.
At present, the dust has long been settled on the new issue, and short-term operations are no longer the focus of discussion.
I think it's a good time to look at this business with a more peaceful long-term mindset.
Given its track attributes and leading position, we have reason to believe that this company will appear in our field of vision again and again in the future.
In terms of corporate background, there are two groups of founder teams.
Founder Li Huamin, Executive Director and CEO of Angelalign.
Before 2003, Li Huamin spent a long time helping his father, Li Shijun, run a dental clinic, the founder of Nanning Angel Dental Disease Prevention and Treatment Hospital and a participant in the establishment of the China Dental Foundation.
The founder Yan Yongnian, the first director of the Institute of Material Forming Manufacturing Automation of Tsinghua University, the first director of the Institute of Biomanufacturing of Tsinghua University, "the first person in China's 3D printing".
In 2001, inspired by the news of the listing of foreign invisible braces "Invisalign", Yan Yongnian, 63, and Wang Bangkang, dean of the School of Stomatology of Capital Medical University (64 years old), engaged in interdisciplinary intersection, and the two scholars who added up to more than 100 years began to work together to develop bracketless invisible orthodontic technology.
In 2003, Yan Yongnian's team suffered from underfunding.
In the same year, 29-year-old Li Huamin and his father Li Shijun bought out the technology with 2 million yuan and invested 5 million yuan to form Beijing Angel of Time Biotechnology Co., Ltd. with Yan Yongnian and Wang Bangkang.
Above is the founding team.
At the capital level, the time comes 12 years later.
In 2015, the huge financial pressure brought about by long-term R&D investment and marketing expenses made it difficult for the founding team to continue.
In that year, Feng Dai left Warburg Pincus and established Songbai Capital with his colleague Huang Kun, which directly acquired Angelalign for $63.94 million, and then ceded 32.21% of the shares to motivate the team and employees.
This is the capital structure of angels of the present era.
According to the prospectus, the controlling shareholder of Angelalign is Songbai orthodontics, with a shareholding ratio of 67.1242%, and the investment behind it comes from Hillhouse Capital, which holds 96.67% of the shares in carecapital and indirectly holds 64.88% of the equity of Angelal.
In addition, Li Huamin holds 15.8798% of the shares, non-executive director Huang Kun holds 0.4814%, directors, executives and employees including Li Huamin hold a total of 32.2104%, and the remaining shares are held by third parties.
The technical faction represented by Yan Yongnian has exchanged two years of time and years of technology accumulation in exchange for 2 million yuan in revenue and opportunities for continuous participation;
Entrepreneurs represented by Li Huamin, the best time of 12 years and a one-time bet of 7 million yuan, in exchange for a reward of 63.94 million US dollars, as well as the opportunity to continue to participate;
Investors represented by Feng Dai, 60 million US dollars of sowing, six years of waiting, in exchange for 28.6 billion Hong Kong dollars (about 3.6 billion US dollars) in return, and the biggest future growth gains;
It's a long relay race, with technologists, entrepreneurs, and investors coming together.
Converting to the corporate deck is a rich bullet of technical genes, industry experience and Hillhouse.
Why do people think this is a good track that is visible to the naked eye?
The first is to make money.
The gross profit margin is as high as 70%, that is, consumers spend 100 yuan to buy a set of products, and the cost of Angelalign is only 30 yuan.
In the specific product line, Angelalign launched a standard version as early as 2006, and it was not until after the market boom in 2016 that it began to follow up and supplement more product lines to adapt to different consumer groups.
At present, there are four product lines, namely Angelalign Standard Edition, Champion Edition, comfos and Children's Edition, with a suggested retail price ranging from 26,000 to 40,000 yuan.
This is actually quite reasonable.
In the cosmetics industry, Estée Lauder's gross profit margin was 80.6%, Shiseido's gross profit margin was 75.59%, and Shanghai Jahwa's skin care products gross margin was 77.7%.
The gross profit margin of the beauty instrument is also above 70%, and even more said (an engineer of a Siemens industry), a five-thousand-yuan beauty instrument, parts can be bought on Taobao, full of full calculation, the cost only needs 70 yuan.
On the surface, products with high gross profit margins are often due to high marketing costs.
At a deep level, products with high marketing costs actually mean that "consumer groups are not so strongly needed", precisely because the demand is not strong enough, so external factors such as advertising, marketing, brand culture, consumerism, and appearance anxiety are needed to invest in stimulation.
In addition, the more "non-standard" the product performance, the more difficult it is to measure with standardized data, the greater the marketing pressure of the relevant track enterprises, which will reverse the increase in gross profit margin.
Moreover, when the moat of the enterprise is deeper, the more it occupies the favorable position at both ends of the smile curve, the more the enterprise has the confidence to do high gross profit margins.
Back to angels of time.
First of all, on the big track, under the conceptual framework of the value economy, the non-rigid demand of the market and the non-standardized measurement of product efficiency make itself have the original gene of high gross profit.
Secondly, in the subdivision of orthodontics, Angelalign also accumulates its own barriers at both ends of research and development and branding.
Needless to say, Angelalign has obtained a total of 39 authorized patents in the past three years, including 21 utility model patents, 9 invention patents, and 9 design patents, which have accumulated in biomechanics, materials science, computer science, 3D printing intelligent manufacturing and other aspects.
In terms of data, the evaluation of orthodontic effect is completely based on clinical performance, the accumulation of clinical data is essential, the industry leader Aiqi Technology has accumulated more than 9.6 million cases, but the average cycle of orthodontics is long (2-3 years), and the corrective effect of new brands often takes many years to be verified.
In terms of brand, Angelalign, as a medical device, actually relies more on the recognition of the doctor group.
And this group often pays attention to evidence-based medicine, in the entire correction process of clinicians and Angelalign interaction is very frequent, doctors participate in the design and customization of appliances (3D printing technology), for the brand awareness and viscosity is relatively strong, it is easy to form the user's inertia choice.
Everything is too nice to be true.
As the third in the industry, Zhengya only holds less than 10% of the share, and the remaining other competitors share less than 10%.
Based on the previously mentioned characteristics of industry barriers, Angelalign can be said to be in a track with high certainty and high growth.
But with a rigorous attitude, we should also try to find out, which are the warning lines that investors need to pay attention to? In a seemingly bright future, there are no shadows that require people to be vigilant.
First, there is the question of valuation.
In the short term, market liquidity and confidence are relatively weak, and the prospect of the track on medical beauty is also in a fluctuating stage, and a firm consensus like new energy has not yet been formed.
Under this kind of large fluctuation, it means that there is a risk of chasing highs and trapping, but also means that there is an opportunity to intervene at a low price, and you need to be cautious to grasp it.
In terms of consumption frequency, orthodontics can be said to be a product that a person will only consume once in a lifetime, and it is difficult to produce the concept of "repurchase".
In addition, compared with brands that are completely toc cosmetics, decorations, bags, etc., invisible braces need to provide more "functional attributes" than "ostentatious attributes".
Therefore, in the smile curve mentioned above, the brand value dimension of Angelalign on the right side should also be discounted.
So, for a product manufacturing company that relies more on technology-driven and focuses on providing deterministic functions, is the price-to-earnings ratio of 100 times too high?
Debatable.
Let's look at scalability.
Since what has just been said does not have the "repurchase" attribute, then the continuous development of the market is particularly important.
In the short term, the development of the sinking market is the top priority of Angelalign, and this is likely to become the core indicator of the company in the past five years.
In the long run, the globalization road of overseas expansion and the all-round competition with Invisalign are the challenges that Angel of the Times must face.
In the United States, Invisalign has obtained more than 80% of the market share and has already actively launched a global layout.
Whether Angelalign is prepared for this, and how to balance the relationship between the domestic sinking market and overseas expansion in the short term, are all dimensional indicators that investors should focus on.
In addition, the hidden dangers of security incidents and the corresponding public opinion risks, monopoly position and policy risks, potential technological breakthroughs, and the possibility of overtaking in curves brought about by other medical and aesthetic developments will all pose a threat to Angelalign to varying degrees.
Ultimately, it all comes back to the market itself.
Only when people feel safe, relaxed, and free, will there be a realistic possibility for the main market to fully embrace the "beauty economy".
These are the two concepts mentioned at the beginning of the article.