Global Healthcare Analyst

Tina Banerjee

Equity Bottom-Up

<ul>
<li>On a constant-currency basis, Q3 revenue of <a href="https://www.smartkarma.com/entities/align-technology-inc" target="_blank" data-smartkarma-citation="entities:2817:1" rel="noopener">Align Technology (ALGN US)</a> was reduced by 3% sequentially and 6% year-over-year, one of the largest quarterly foreign exchange impacts.</li>
<li>Weak consumer sentiment is taking a toll on Invisalign shipment, with adult case starts plunging 11% q/q and 16% y/y to 377K. Invisalign ASPs nosedived to nine-quarter low of $1,150.  </li>
<li>Amid increasing competition and macroeconomic headwinds, long-term model of 20–30% revenue growth is hard to achieve. The company is also expected to miss 2022 operating margin target of 20%.</li>
</ul>


On a constant-currency basis, Q3 revenue of Align Technology (ALGN US) was reduced by 3% sequentially and 6% year-over-year, one of the largest quarterly foreign exchange impacts.
Weak consumer sentiment is taking a toll on Invisalign shipment, with adult case starts plunging 11% q/q and 16% y/y to 377K. Invisalign ASPs nosedived to nine-quarter low of $1,150.  
Amid increasing competition and macroeconomic headwinds, long-term model of 20–30% revenue growth is hard to achieve. The company is also expected to miss 2022 operating margin target of 20%.


Align Technology (ALGN US): Q3 Result Not Aligned with Consensus; Outlook Remains Cloudy

HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

<ul>
<li>Due to declining performance, lack of core competitiveness and increasing competition, the market has to re-examine the growth potential and outlook of Angelalign.The era of high margin is fading away.</li>
<li>Angelalign’s low-price strategy is easily hit by similar products with lower prices. Once its price loses advantage, it will directly lead to a rapid and substantial decline in overall performance.</li>
<li>Due to its worse-than-expected 2022H1 performance and economic downturn, we lowered our 2022 forecast of Angelalign. Angelalign shouldn't be valued that much higher than Align Technology, expecting more downside ahead. </li>
</ul>


Due to declining performance, lack of core competitiveness and increasing competition, the market has to re-examine the growth potential and outlook of Angelalign.The era of high margin is fading away.
Angelalign’s low-price strategy is easily hit by similar products with lower prices. Once its price loses advantage, it will directly lead to a rapid and substantial decline in overall performance.
Due to its worse-than-expected 2022H1 performance and economic downturn, we lowered our 2022 forecast of Angelalign. Angelalign shouldn't be valued that much higher than Align Technology, expecting more downside ahead. 


Angelalign Technology (6699.HK) 22H1 - Still “Bubble” in Valuation; The Era of High Margin Is Over

<ul>
<li>
<a href="https://www.smartkarma.com/entities/angelalign-technology-inc" target="_blank" data-smartkarma-citation="entities:31480:1" rel="noopener">Angelalign Technology (6699 HK)</a> has reported muted H1 2022 results, which were negatively impacted by the resurgence of the COVID-19 pandemic in China and the corresponding restrictions.</li>
<li>Revenue from core business of clear aligner treatment grew just 3% y/y. However, lower ASP and higher cost of sales, pulled down the gross profit margin by 930bps to 60.2%.</li>
<li>Thus far in H2 2022, China has imposed lockdowns in multiple major cities. With the uncertainty over the duration of COVID, no immediate respite is seen in Angelalign’s business.</li>
</ul>



Angelalign Technology (6699 HK) has reported muted H1 2022 results, which were negatively impacted by the resurgence of the COVID-19 pandemic in China and the corresponding restrictions.
Revenue from core business of clear aligner treatment grew just 3% y/y. However, lower ASP and higher cost of sales, pulled down the gross profit margin by 930bps to 60.2%.
Thus far in H2 2022, China has imposed lockdowns in multiple major cities. With the uncertainty over the duration of COVID, no immediate respite is seen in Angelalign’s business.


Angelalign Technology (6699 HK): 1H22 Profit Drops As Challenging Operating Environment Continued

<ul>
<li>Due to better-than-expected VBP results, we saw a decent rally of MDG’s share price last Friday. However, all the medical products that are covered by VBP begin to lose logic. </li>
<li>Backwardness in R&amp;D is a bottleneck restricting MDG's future growth. MDG is more like a manufacturing/processing plant relying on labor dividends than a technology company with high product added value.</li>
<li>Multiple risks (e.g.pandemic, depreciation of exchange rate against US dollar, economic downturn, etc.) will add more uncertainties to MDG's 2022 performance. MDG’s share price could remain tepid after temporary rally. </li>
</ul>


Due to better-than-expected VBP results, we saw a decent rally of MDG’s share price last Friday. However, all the medical products that are covered by VBP begin to lose logic. 
Backwardness in R&amp;D is a bottleneck restricting MDG's future growth. MDG is more like a manufacturing/processing plant relying on labor dividends than a technology company with high product added value.
Multiple risks (e.g.pandemic, depreciation of exchange rate against US dollar, economic downturn, etc.) will add more uncertainties to MDG's 2022 performance. MDG’s share price could remain tepid after temporary rally. 


Modern Dental Group (3600.HK) 22H1- Share Price May Remain Tepid Due to Lack of Core Competitiveness

<ul>
<li>Due to pandemic/lockdown/economic downturn, the case shipments could further decline. Our revenue forecast this year is below 20%, or even below 15%. We also lowered our forecast on profit margins.</li>
<li>Limited qualified orthodontists in China and challenging internationalization cast doubts on Angelalign’s long term growth prospects. We can’t see high growth potential of Angelalign with certainty.</li>
<li>Angelalign’s performance in 2022 would be under pressure. Although PE/TTM reached about 73 by the end of June 10 after corrections, it's still overvalued. The upside potential could be limited.</li>
</ul>


Due to pandemic/lockdown/economic downturn, the case shipments could further decline. Our revenue forecast this year is below 20%, or even below 15%. We also lowered our forecast on profit margins.
Limited qualified orthodontists in China and challenging internationalization cast doubts on Angelalign’s long term growth prospects. We can’t see high growth potential of Angelalign with certainty.
Angelalign’s performance in 2022 would be under pressure. Although PE/TTM reached about 73 by the end of June 10 after corrections, it's still overvalued. The upside potential could be limited.


Angelalign Technology (6699.HK) - There Is Still Plenty of Downside, but Limited Upside Potential

United States

Align Technology, Inc. designs, manufactures, and markets the Invisalign System, a method for treating the misalignment of teeth.  The Company's system corrects the misalignment using a series of clear, removable appliances that move teeth to a desired final position.

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Align Technology (ALGN US)