[Click eStock] "Dentium, Operating Profit Margin Improvement Continues... Most Undervalued Stock in the Same Industry"

[Asia Economy Reporter Jihwan Park] Ebest Investment & Securities evaluated that Dentium (stock code 145720) is expected to continue its operating profit margin improvement trend in the third quarter of this year, but its stock price remains at the most undervalued level compared to peers in the same industry. The investment opinion 'Buy' and target price of 91,000 KRW were maintained.

Researcher Eun-ae Jo of Ebest Investment & Securities stated, "Third-quarter sales are expected to be 74 billion KRW, and operating profit 17.7 billion KRW, representing increases of 19% and 42% year-on-year, respectively." Sales by country showed export growth to major countries such as China and Russia compared to the previous quarter, while advertising expenses, which were executed at an average quarterly scale of 5 billion KRW in the first half, decreased, leading to an expected continued improvement in operating profit margin to 24%. This is an improvement of 4 percentage points year-on-year and 1 percentage point quarter-on-quarter.

Even with a conservative estimate of variable costs in the fourth quarter, the annual operating profit margin is expected to reach 22%. The expected annual sales for this year are 285.2 billion KRW, and operating profit is expected to increase by 24% and 60% year-on-year, respectively, to 63.5 billion KRW. Even with very conservative estimates of variable costs such as advertising expenses and bad debt amortization in the fourth quarter, the increase in the proportion of high-margin export sales and the operating leverage effect make it possible to achieve an operating profit margin of 22%.

Researcher Eun-ae Jo said, "In the third-quarter performance, it is expected to be confirmed that the overseas sales strategy is a two-track structure of direct sales and agency sales, which allows margin improvement without special cost increase issues," adding, "Currently, the company's stock price level is at a price-to-earnings ratio (PER) of 17 times, which is the most undervalued level compared to peers."