[Click eStock] Coway, Continued Performance Improvement in Second Half... Upgrade Investment Rating to Buy

Hana Financial Investment Report
Q2 Operating Profit Expected to Increase by 9% Year-on-Year

[Asia Economy Reporter Minji Lee] Hana Financial Investment upgraded its investment rating on Coway from neutral to buy on the 16th, judging that Coway will maintain its performance improvement trend in the second half of the year regardless of the impact of the novel coronavirus infection (COVID-19). The target stock price was maintained at 90,000 won.

Coway's sales and operating profit in the second quarter are expected to increase by 5% and 9%, respectively, compared to the same period last year, reaching 796 billion won and 150 billion won. Rental division sales are expected to increase by 4%, and mattress-centered financial lease sales are expected to grow by 7% year-on-year, showing a favorable growth trend. The total number of domestic rental accounts is estimated to reach 1,472,000, an increase of 41,000 from the previous quarter.

Overseas business is expected to perform better than anticipated. Sales of the Malaysian subsidiary are expected to grow by about 28% compared to the previous year. Although uncertainty increased after the March shutdown, the easing of the June shutdown led to nearly 30% external growth compared to the same period last year. The U.S. subsidiary is expected to grow by 8%, and exports are expected to increase by about 5% compared to a year ago due to diversification of clients in China, the U.S., Japan, and others.

Jongdae Park, a researcher at Hana Financial Investment, explained, “Since being acquired by Netmarble, royalty costs have been eliminated and promotional expenses due to COVID-19 have decreased, resulting in an operating profit margin of 18.9%. As economic activities are resuming domestically and internationally in the second half of the year, the scale of external growth will further expand.”

However, retirement allowance provisions that may arise when CS Doctor employees are converted to regular positions could act as a one-time cost factor. The expected annual sales and operating profit for this year are 3.223 trillion won and 568 billion won, respectively, up 6.8% and 24% from the previous year.

Coway, the undisputed number one in home appliance rentals, can maintain a stable performance trend regardless of the economic cycle. Researcher Jongdae Park said, “Considering the overwhelming market share, solid performance improvement, and expansion of overseas businesses such as Malaysia and the U.S., a price-earnings ratio (PER) of 15 times is applied,” adding, “The gap between the target stock price and the current stock price has widened, so the investment rating is raised to buy.”

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