[Click eStock] "Coway, Stable Performance Trend... Improvement in Business Environment"

[Asia Economy Reporter Lee Jung-yoon] KB Securities maintained its buy rating and target price of 100,000 KRW for Coway on the 20th, citing stable earnings flow and valuation attractiveness. Additionally, the easing of social distancing measures is expected to help improve the door-to-door sales business environment.

Coway's sales in the first quarter of this year recorded 928 billion KRW, a 6% increase compared to the previous year, and operating profit rose by 1% to 172.7 billion KRW. Compared to consensus estimates, sales were 5% below expectations, but operating profit met the estimates.

Domestic sales amounted to 710.1 billion KRW, and operating profit was 143.1 billion KRW, representing increases of 5% and 28% respectively from the previous year. New rental sales grew by 10% year-on-year due to the launch of innovative products such as the Noble series and strengthened marketing efforts. The monthly average cancellation rate remained low at under 1%, and the number of rental accounts increased by 65,000 compared to the previous quarter. However, overseas performance fell short of expectations. In Malaysia, sales grew by 9% due to changes in accounting standards, while operating profit decreased by 4%. In the United States, sales increased by 7% due to higher logistics costs and tariffs, but operating profit margin dropped by 58% year-on-year to 2.4 billion KRW.

Coway's expected sales for this year are projected to increase by 9% year-on-year to 4.0078 trillion KRW, with operating profit also expected to rise by 9% to 699.8 billion KRW. Despite the first quarter's performance falling short of expectations, the proportion of overseas subsidiaries in consolidated sales and operating profit is expected to rise to 36% and 32%, respectively. In particular, the Malaysian subsidiary's sales are estimated to grow by 18%, with operating profit increasing by about 20%. However, due to the increased base burden, the external growth rate, which previously recorded 30-40%, is expected to slow somewhat.