[Click eStock] "Ostem Implant, Rapid Sales Recovery Expected in Key Regions in the Second Half"

[Asia Economy Reporter Eunmo Koo] Korea Investment & Securities forecasted that Ostem Implant is expected to achieve rapid sales recovery in key regions such as China and Russia in the second half of the year, overcoming the impact of the novel coronavirus disease (COVID-19).

Ostem Implant is a leading domestic implant company holding the number one market share for implants in both Korea and China. The company aims to grow into a comprehensive dental company by expanding its product portfolio across all areas, including not only implants but also chairside equipment, dental raw materials, dental management software, and B2C consumer goods (toothpaste and toothbrushes). In the second quarter, strong sales management through a direct sales system led to a rapid sales recovery in major export countries such as China and Russia.

It is expected that rapid sales recovery will continue in key regions like China and Russia in the second half of the year, overcoming COVID-19. On the 7th, researcher Seungyun Jung of Korea Investment & Securities projected in a report that Ostem Implant's sales in the third quarter of this year will reach 169.3 billion KRW, a 15% increase compared to the same period last year, and operating profit will grow 77% to 19.2 billion KRW.

As the increase in selling and administrative expenses slows down due to reduced marketing, the operating profit margin is also expected to improve. Researcher Jung stated, “Over the next 2 to 3 years, profitability will gradually improve due to cost control, conservative accounting treatment, and the turnaround to profitability of the Chinese subsidiary,” adding, “Operating profit margins are expected to rise to 12% and 14% in 2021 and 2022 respectively, with net profit increasing by 35% and 37% respectively.”

The relative valuation is also considered attractive. Researcher Jung noted, “The average price-to-earnings ratio (PER) of global implant companies next year, which are relatively free from COVID-19 damage, is 24 times,” and pointed out, “Straumann, the leading implant company, trades at an expected PER of 47 times in 2021, reflecting a premium for being the top company, making its valuation burdensome.”

He further explained, “The high EPS growth rates of peer companies next year are due to the low base effect this year, and assuming EPS at a normal level, Ostem’s actual growth rate is more prominent,” concluding, “Therefore, the current stock price level is an excessively undervalued range.”

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