[Click eStock] "Ray's Long-Term Growth Potential Remains Unchanged"

[Asia Economy Reporter Hyunseok Yoo] Daishin Securities analyzed on the 9th that Ray is expected to show a quarterly upward trend in performance, with the first quarter being the bottom. No investment opinion or target price was provided.

Daishin Securities forecasted that Ray's first-quarter sales and operating profit will be 12.8 billion KRW and 650 million KRW, respectively, down 4.9% and 37.7% year-on-year. Researcher Han Kyung-rae of Daishin Securities explained, "Due to the complete suspension of dental operations in China in February and the halt of medical equipment installations in the US and Europe in March, sales recognition was delayed, resulting in expected performance below estimates. However, compared to concerns about the impact on China, which accounts for the largest portion of sales, the results are judged to be favorable as rapid recovery in Chinese sales has been observed since March, and countries such as the US, Europe, and Japan, where the impact of COVID-19 was limited at the beginning of the year, recorded stable performance."

Daishin Securities particularly expects performance to rise from the first quarter bottom. They projected Ray's annual sales and operating profit this year to be 91.1 billion KRW and 18.7 billion KRW, respectively, representing increases of 24.6% and 45.2% compared to the previous year. He explained, "From April, normalization in China, which contributes most to performance, is expected, and the annual operating profit margin is forecasted to improve from the first quarter OPM low of 5.0%, with an expected operating profit margin of 20.5% in 2020." He added, "The additional momentum from the second quarter, including Straumann's ODM production of clear aligners in China and M&A plans to expand business areas such as permanent teeth and orthognathic surgery, is expected to resume after the second half of this year."

The researcher stated, "Although the impact on performance due to the COVID-19 situation is inevitable, the growth direction remains solid, with an expected high growth rate of 40% average annual sales growth from 2017 to 2020 centered on digital therapeutic solutions." He further explained, "Once COVID-19 subsides, expansion into emerging markets such as China and India is expected to accelerate."

He emphasized, "The demand slowdown caused by COVID-19 will lead to deferred demand during the recovery phase. When the global sales environment normalizes, the largest operating leverage effect within the industry is expected, and the momentum for expanding newly resumed business areas remains valid. The current stock price reflects additional downward revisions to performance compared to existing business plans, so with valid mid- to long-term growth momentum, gradual stock price recovery is anticipated."