[Click eStock] Dentium, 2Q China Exports Increase... Target Price Up

Daol Investment & Securities forecasted on the 3rd that Dentium's exports to China in the second quarter of this year will recover, leading to an increase in performance. Accordingly, they maintained a 'Buy' investment rating and raised the target price to 200,000 KRW.

Jonghyun Park, a researcher at Daol Investment & Securities, stated, "We expect second-quarter sales to increase by 14% year-on-year to 110.5 billion KRW, and operating profit to rise by 12% to 39.5 billion KRW," adding, "We anticipate a recovery in exports to China due to the government-led implementation of the overseas pharmaceutical bulk purchasing (VBP) system."

Researcher Park predicted, "Based on customs data, second-quarter exports to China are expected to reach 100 million USD, a 37% increase from the previous year, marking an all-time high, while exports to Russia are projected to reach 31.4 million USD, a 95% increase year-on-year."

Due to the impact of price reductions in China, the gross profit margin (GPM) is estimated to decrease by 5.3 percentage points from the previous quarter to 69.4%. However, selling and administrative expenses are forecasted to increase by 15% year-on-year to 37.2 billion KRW, with labor costs rising 8% to 12.7 billion KRW and advertising expenses increasing 22% to 4.9 billion KRW.

Annual sales for this year are estimated to increase by 18% year-on-year to 418 billion KRW, and operating profit is expected to grow by 17% to 147.1 billion KRW. Researcher Park estimated, "Operating profit margin (OPM) is projected to decrease slightly by 0.1 percentage points year-on-year to 35.2%," adding, "Since CAPEX and workforce expansion are still not planned, a profit margin in the 30% range can be achieved."

He further analyzed, "If economies of scale exceeding the decline in average selling price (ASP) in China occur, it is possible to achieve an OPM level similar to that of the previous year."

He continued, "Dentium is a direct beneficiary of the implementation of China's VBP," and added, "Despite surpassing the operating profit growth rate of overseas implant manufacturers (2023E weighted average operating profit growth rate of 5%), it is undervalued based on PER (2023E weighted average PER of 35 times), so re-rating is expected as sales to China begin in earnest."

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