[Click eStock] "Coway, Stock Slump Is Only Due to Interest Rate Issues... Fundamentals Remain Strong"

[Asia Economy Reporter Kwon Jae-hee] Yuanta Securities maintained a 'Buy' rating on Coway on the 18th, setting a target price of 110,000 KRW.

Coway's performance in the first quarter of this year showed sales of 996.3 billion KRW and operating profit of 173.7 billion KRW, representing increases of 13.3% and 1.8% respectively compared to the same period last year. The net increase in rental accounts in Korea and Malaysia is estimated at 50,000 and 130,000 respectively.

Researcher Lee Jin-hyeop of Yuanta Securities analyzed, "Despite a partial strike by service managers in the first quarter, variables that could affect performance such as rental sales and cancellation rate management appear to have been stably controlled."

Despite solid performance, Coway's stock price has fallen 11% compared to the beginning of the year, underperforming the KOSPI average by 2 percentage points.

Lee said, "Coway's recent stock price weakness is due to interest rates," adding, "The rental business can be considered a business holding a long position in bonds, and Coway's market capitalization can be understood as the sum of the value of these rental bonds."

He added, "In this case, the interest rate hike cycle would inevitably have a negative impact on Coway's stock price."

However, with the growth trend in the Thai market standing out, there is a forecast that it will have a positive impact on future performance and stock price. Last year, the Thai subsidiary recorded sales of 48.7 billion KRW and an operating loss of 11.6 billion KRW. The number of accounts in the Thai subsidiary in the fourth quarter of last year was around 80,000 to 90,000, and considering the recent net increase, it is expected to break even (BEP) within this year.

Lee interpreted, "Considering the number of households and per capita GDP in Thailand, a rental market about 70% the size of Malaysia's could be formed," adding, "Attention is needed on the Thai market as the next Malaysia."