[Click eStock] "D.O, Domestic Sales Disruption and Decreased China Revenue Impact"…Target Price Down

[Asia Economy Reporter Lee Jung-yoon] Samsung Securities on the 25th slightly lowered the target price for Dio from the previous 52,000 KRW to 50,000 KRW, citing expected performance downgrades due to China's lockdown measures. However, the investment rating of "Buy" was maintained.

Dio's sales in the first quarter of this year amounted to 34.6 billion KRW, a 1.7% increase compared to the previous year, while operating profit decreased by 51.2% to 5.3 billion KRW. These figures were 15.7% and 51.2% below consensus estimates, respectively. Due to operational disruptions caused by the spread of the Omicron variant, domestic sales fell by 4.4% to 10.4 billion KRW, and sales in China decreased by 22.7% to 6.6 billion KRW due to the lockdown impact.

Sales in the United States declined by 13.4% year-on-year to 4.9 billion KRW. The sales gap that occurred prior to the signing of new contracts with corporate dental service organizations (DSO) and distributors in the previous quarter was recovered. Sales in Portugal continued to grow, increasing by 143.7% to 2.3 billion KRW. Although sales in other Asian regions decreased, sales in emerging markets such as Turkey and India rose, resulting in sales in other regions increasing by 109.5% to 10.5 billion KRW.

Seogeunhee, a researcher at Samsung Securities, explained, "We expect the impact of the China lockdown to continue through the second quarter of this year, leading to a slight downward revision of the annual performance forecast compared to previous estimates," adding, "We are expanding operations mainly in regions where lockdowns have been eased to minimize sales decline."

Furthermore, it is expected that the scale of performance will expand significantly once new distribution contracts in the United States are signed. Researcher Seo said, "We are in the process of signing contracts with new DSOs and distributors in the U.S. The number of trading partners secured by the new DSO in the U.S. is about 1,500, making it the largest in the U.S., and the new distributor is known to have about 100,000 clients."