[Click eStock] "Coway to Maintain Stable Growth Amid Uncertain Environment"

[Asia Economy Reporter Kwon Jae-hee] IBK Investment & Securities maintained a 'Buy' rating on Coway on the 16th, setting a target price of 105,000 KRW.

Coway's consolidated sales for the first quarter of this year reached 928 billion KRW, and operating profit was 172.7 billion KRW, marking increases of 5.6% and 1.1% respectively compared to the same period last year. Domestic rental sales in the first quarter totaled 3.53 million accounts, following a cumulative net increase of 2.09 million accounts in 2021, with a net increase of 670,000 accounts in the first quarter alone, representing a high growth rate of 103% year-on-year. Financial lease sales in the first quarter amounted to 159.9 billion KRW, surpassing 150 billion KRW again this quarter following a record high in the fourth quarter of last year.

Ji-young Ahn, a researcher at IBK Investment & Securities, analyzed, "Fundamental improvements continued with increased sales of premium products centered on water purifiers and the expansion of five financial lease categories," adding, "It appears that the expansion of the financial lease proportion centered on core categories led the net increase in rentals."

Overseas operations are also maintaining high growth. Overseas subsidiary sales reached 332.4 billion KRW, a 13% increase compared to the same period last year. The number of accounts in Malaysia increased by 28%, and despite increased logistics costs and the impact of China's lockdown measures affecting the peak season of retail channels centered on Amazon in the U.S. during the second and third quarters, growth and profitability recovery were confirmed mainly through door-to-door sales.

Despite the impact of account conversions to financial leases, the actual fundamentals have been strengthened. Although cost increases due to labor, logistics, advertising and marketing expenses, financial leases, and premium product growth are inevitable this year despite a stable business structure, the domestic environmental home appliance business, innovative product launches, and expansion of account management soundness are expected to maintain a stable growth trend centered on a cancellation rate below 1% and a total of 6.55 million accounts.

Researcher Ahn stated, "Recovery is becoming visible with the expansion of growth in overseas subsidiaries centered on Malaysia and the U.S.," and assessed, "Despite external uncertainties, the stock price momentum is expected to maintain an advantage focusing on business stability."