[Click e-Stock] "Dio Set for Full-Fledged Turnaround in 2026"

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On February 11, Hanyang Securities projected that Dio is completing a large-scale restructuring process that has taken two years and will enter a full-fledged earnings recovery phase. The brokerage analyzed that, as overseas sales growth led by China overlaps with the effects of cost efficiency, a clear turnaround is expected starting in 2026.

Dio is a global dental implant specialist that was listed on the KOSDAQ market in June 2000. As of the end of the third quarter of last year, sales from implant-related products accounted for 87.3% of total revenue, forming the core of its business portfolio, while the share of exports climbed to 83.8%, reinforcing a structure centered on overseas sales.

Over the past two years, Dio has carried out a so-called "big bath," including large-scale cost and asset write-downs. It is assessed that the long-standing issue of trade receivables, which had been pointed out as a risk, has also been largely resolved. The researcher said, "In particular, trade receivables management had been cited as a major risk, but as of the third quarter of last year, a substantial portion of the receivables had been collected," adding, "By reducing advertising and promotion expenses and improving the efficiency of selling, general and administrative expenses, the company is also strengthening a management stance focused on profitability."

The company has also improved its fundamentals on the production side. By securing a local production base in China, it has achieved both price competitiveness and supply stability, while also expanding its ability to respond to global demand. He stated, "As the restructuring of the financial structure and cost efficiency measures have been partially completed, future performance is expected to be evaluated mainly on the competitiveness of the core business and the results of global market expansion," and emphasized, "A gradual trend of earnings improvement is expected to appear from 2026 onward."

The core growth driver is China. Cumulative sales in China, which were about 15.8 billion won in the third quarter of 2024, rose to 30.5 billion won on a cumulative basis in the third quarter of this year, up 92.6% year-on-year. The researcher said, "The market that deserves the most attention is China," and added, "If the impact of the Chinese government's VBP policy becomes fully effective going forward, sales of around 100 billion won are expected from the Chinese market alone." He went on to explain, "The company has secured a local production base in China capable of supporting supplies of about 50 billion won, so price competitiveness and supply stability are also expected to be strengthened."

Growth is also clear in regions outside China. Cumulative sales in major overseas countries in the third quarter are estimated to have increased by an average of 45.1% year-on-year. In India, demand for implants is expected to expand amid rising dental healthcare needs and the expansion of medical infrastructure, while in the Middle East and CIS regions, stable growth in demand is continuing, driven by aging populations and improved access to healthcare.

He said, "This expansion of overseas sales is expected to have a positive impact not only on short-term earnings growth, but also on rising brand awareness and the strengthening of distribution networks," and assessed, "The growth momentum in overseas markets will be a key factor driving the company’s top-line expansion and earnings improvement going forward."

The pace of earnings improvement is also expected to be steep. Hanyang Securities forecasts Dio’s consolidated sales this year at 205.36 billion won, up 25.7% year-on-year, and operating profit at 30.6 billion won, up 180.7%. The researcher said, "As sales exceed 200 billion won, both the easing of the fixed-cost burden and the operating leverage effect will appear at the same time, so the pace of profitability improvement is also expected to accelerate," adding, "With the corporate tax reduction benefits from its designation as an advanced technology company also reflected, the growth in after-tax profit is expected to expand going forward."

Shareholder return policies are another factor raising expectations for a valuation re-rating. Over the past two years, Dio has conducted two share buybacks and canceled 1.5 million treasury shares. The researcher said, "If additional share buybacks and cancellations are carried out in the future, the simultaneous effects of higher EPS and a reduction in the number of shares in circulation will act as a factor strengthening share price momentum," and judged, "Given that Dio has completed structural improvements to its fundamentals over the past two years and is now in a phase where earnings growth and shareholder returns coincide, expectations for a valuation re-rating are also gradually increasing."

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