[Click eStock] "Zinus, US Mattress Glass Fiber Lawsuit May Cause Stock Price Decline"

[Asia Economy Reporter Minji Lee] Daishin Securities maintained a buy rating and a target price of 120,000 KRW for Jinus on the 18th, stating that the stock price had fallen excessively due to issues related to a lawsuit in the United States.

The previous day, Jinus's stock price plunged sharply, hitting the lower limit during trading after news emerged that a consumer in Illinois, USA, filed a lawsuit claiming itching caused by fiberglass after ignoring the warning label attached to the product and removing the mattress cover.

Researcher Han Kyung-rae of Daishin Securities explained, “Jinus, like other memory foam companies, applies a fireproof wall using fiberglass to comply with the regulations of the U.S. Consumer Product Safety Commission,” adding, “There have been cases in other U.S. states where similar lawsuits were filed, and rulings found no issues with Jinus memory foam mattresses.”

Jinus plans to actively address market concerns regarding this lawsuit by responding through a specialized law firm.

Due to the stock price decline caused by the lawsuit issue, Jinus's price-to-earnings ratio dropped from 16 times last year to 7 times. Researcher Han said, “Concerns about temporary production halts at Chinese furniture factories due to COVID-19 and a slowdown in first-half earnings growth have already been reflected in Jinus's stock price,” adding, “Considering the lowered stock price, the current time is a buying opportunity.”

The Chinese furniture factory is expected to see gradual productivity improvements through the normalization of material supply by the second quarter of this year. In the U.S. market, Jinus is accelerating Costco's omni-channel following Amazon and Walmart, and with an expanded living room furniture lineup, it is expected to record high sales growth in the second half of the year.

Researcher Han stated, “Expectations for productivity improvements at Indonesia plants 1 and 2 and the expansion of plant 3 remain valid,” explaining, “Due to yield improvements and sales increases at Indonesia plant 2, the operating profit margin in 2020 is expected to improve by 1.8 percentage points from the previous year to 14.5% thanks to fixed cost leverage effects.”

This content was produced with the assistance of AI translation services.