[Post-IPO] CNTOOS Seongjin, Sales Increased but Profitability Deteriorated

[Asia Economy Reporter Hyungsoo Park] It has been over a year since CNTOOS Seongjin, well known for its mask brand 'Aer,' went public. Despite concerns, mask sales did not sharply decline as the COVID-19 pandemic continued for an extended period. However, intensified competition led to lower selling prices and increased marketing expenses, resulting in deteriorated profitability.

According to the Financial Supervisory Service's electronic disclosure system on the 23rd, CNTOOS Seongjin recorded sales of 129.1 billion KRW and operating profit of 44.3 billion KRW through the third quarter of last year. Compared to the same period the previous year, sales increased by 11.2%, but operating profit decreased by 19.3%. The cost of goods sold ratio rose by more than 10 percentage points, and selling and administrative expenses increased by over 40%.

CNTOOS Seongjin sells HEPA-grade air filters and various masks using high-efficiency filter material MB. The average price of filters for air purifiers rose from 4,104 KRW in 2020 to 4,640 KRW by the third quarter of last year. During the same period, the price of health masks dropped from 639 KRW to 532 KRW. The price of industrial masks also decreased from 912 KRW to 684 KRW. Mask prices surged initially due to supply shortages at the start of the COVID-19 outbreak but fell as production increased.

Selling and administrative expenses increased, totaling 16 billion KRW cumulatively through the third quarter of last year. This represents a 42.2% increase compared to 11.2 billion KRW in the same period the previous year. Advertising expenses rose sharply, with 4.5 billion KRW spent in the third quarter alone, compared to just 89 million KRW in the third quarter of 2020.

The average operating rate of mask production facilities slightly declined from 74.9% in 2020 to 72.0% by the third quarter of last year. However, the operating rate for industrial masks increased from 61.2% to 70.3%.

Considering the stagnation in mask segment growth, CNTOOS Seongjin is fostering its air filter segment used in air purifiers and vacuum cleaners. As its market share in air purifier filters rises, related sales are increasing. The cumulative sales of air purifier filters through the third quarter of last year reached 35.8 billion KRW, surpassing the 31.2 billion KRW sales in 2020. The company plans to invest 5 billion KRW to expand air filter production capacity by establishing its 5th plant in Ulsan, which will begin operations in May this year.

As a new business, CNTOOS Seongjin is also advancing into the water treatment filter and air solution sectors. According to the Environmental White Paper, over 2 million water purifiers are supplied annually, with the market size estimated at 2.5 trillion KRW. The domestic water purifier market has a high rental ratio and short product replacement cycles, indicating strong growth potential. CNTOOS Seongjin is expanding into the water treatment filter market, starting with manufacturing filter fabrics used in water purifiers. It also produces water treatment filters for household showerheads and faucets in washbasins and sinks.

Although CNTOOS Seongjin is striving for sustainable growth, its stock price has been declining continuously. After reaching an intraday high of 12,900 KRW on December 9 last year, the stock price halved within about two months. As reopening-related stocks attract attention in the domestic stock market, CNTOOS Seongjin has been relatively neglected. Concerns about a sharp drop in mask-related sales also appear to have influenced this trend.

Researcher Jongseon Park of Eugene Investment & Securities explained, "Contrary to concerns, the decline in sales of the mask business segment is expected to be minimal," adding, "Even if the COVID-19 situation stabilizes, demand for masks against fine dust will remain strong."

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