[Click eStock] Coway, Target Price Down on Lower Operating Profit Estimates for Next Year

[Asia Economy Reporter Kwon Jae-hee] KB Securities maintained its buy rating on Coway on the 17th but lowered the target price to 100,000 KRW. This adjustment is due to the downward revision of operating profit estimates for this year and next, despite record-high performance.

Coway recorded consolidated sales of 945.9 billion KRW and operating profit of 139.2 billion KRW in the fourth quarter of last year. This represents an increase of 10% and 7%, respectively, compared to the same period last year.

Shinae Park, a researcher at KB Securities, stated, "Sales met market expectations, but operating profit fell short by 9%. However, excluding the impact of accounting standard changes at the Malaysian subsidiary, operating profit exceeded forecasts by 6%."

This year, Coway is expected to achieve sales of 4.0405 trillion KRW and operating profit of 701.5 billion KRW, representing a 10% increase compared to the previous year. In particular, with continued strong sales growth from the Malaysian and U.S. subsidiaries, the share of overseas subsidiaries in consolidated sales and operating profit for 2022 is expected to rise to 37% and 33%, respectively.

However, the consolidated operating profit margin for this year is estimated to decline by 0.1 percentage points from the previous year to 17.4%. This is due to ongoing marketing expenses in both Korea and overseas, as well as continued investments in research and development (R&D) and information technology (IT).

Researcher Park analyzed, "Considering the solid sales growth and stable cash flow capabilities of overseas subsidiaries, the stock price remains undervalued."

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