1H26 earnings beat driven by first-time overseas profitability

时代天使(06699)\r

Angelalign’s1H26results beat,highlighted by the first semi-annual profitfrom its overseas business.Revenue increased43%YoY to US$231mn,reaching51%of our prior full-year forecast,above the historical average of43%.Case volumes grew37%in mainland China and43%overseas,leadingmanagement to raise2026E case volume guidance to350,000cases for eachmarket.Notably,Angelalign’s overseas business achieved profitability in1H26,ahead of our expectations and driving total net profit up80%YoY to US$25.5mn.Given strong case growth momentum and improving profitability,we raise our2026E revenue and earnings forecasts by7.5%and1.0%,respectively.\r

First-time overseas profitability signals growing returns from globalexpansion.Overseas revenue rose65%YoY to US$118mn in1H26,accounting for51%of total revenue,while case volume reached168,001(+43%YoY).Importantly,demand remained solid despite a price increase in1H26,reflecting improving doctor recognition of Angelalign’s clinical outcomes andservice capabilities,in our view.The overseas business turned profitable in1H26,with operating profit of US$0.6mn.Excluding share-based payments andlitigation expenses,adjusted overseas operating profit reached US$9mn.Thiswas driven by operating leverage,and improving customer acquisitionefficiency,supported by stronger doctor repurchase.We believe the stronggrowth also indicated limited disruption from patent litigation,which should helpease investor concerns.We expect overseas growth to remain robust andoverseas business to stay profitable on an adjusted basis in2026E.\r

Rapid domestic growth driven by continued market penetration.Domesticrevenue increased25%YoY to US$113mn,supported by37%case-volumegrowth to148,608.Growth continues to be driven by penetration into lower-tiercities and early orthodontics.In our view,the solid domestic performancedespite a weak consumption environment suggested resilient demand inpediatric/adolescent orthodontics and the continued penetration of adult clearaligners.\r

Operating leverage is driving margin improvement.Despite ASP pressurefrom competition and a higher proportion of lower-tier-city and pediatric cases,domestic gross margin expanded2.6ppts YoY to65.8%in1H26,driven bylower production costs and improved treatment-design efficiency.Meanwhile,the SG&A ratio fell3.1ppts YoY.As a result,domestic operating marginimproved5.0ppts YoY to24.2%,while the overseas business turned profitablefor the first time.\r

Maintain BUY.We raise our2026E revenue and earnings forecasts by7.5%and1.0%,respectively.Based on SOTP,we apply23x2026E P/E to thedomestic business and5x2026E P/S to the faster-growing overseas business,in line with relevant peers.We raise our target price to HK$114.21.Risks:overseas expansion under expectations;domestic VBP.