[Click eStock] "Ostem Implant, Annual Operating Profit Expected to Reach 200 Billion Won"

Daol Investment & Securities Report

[Asia Economy Reporter Minji Lee] Daol Investment & Securities maintained a buy rating on Osstem Implant on the 26th and raised the target price by 23% from the previous level to 160,000 KRW. This is based on the analysis that solid growth in China and Russia is driving the earnings.

In the second quarter, Osstem Implant's sales amounted to 265.4 billion KRW, and operating profit was 56.2 billion KRW, representing growth of 32% and 64% respectively compared to the same period last year. Sales in China reached 72.6 billion KRW, increasing by 23% compared to the previous quarter.

Jonghyun Park, a researcher at Daol Investment & Securities, explained, "After the lockdown was lifted in 2020, the Chinese subsidiary experienced a significant increase in sales due to deferred demand. During the Shanghai lockdown in April and May, restocking was carried out, and currently, sales are beginning to pick up."

Sales in Russia reached 24.3 billion KRW, growing 39% compared to the previous quarter. The United States, which had a high base in the first quarter, recorded sales of 41.3 billion KRW, a 5% increase from the previous quarter. Exports to China led the growth, and the average exchange rate in the second quarter was 1,260 KRW per USD, which positively impacted earnings. Japan, T?rkiye, and Taiwan also recorded growth of around 30% compared to the same period last year.

The operating profit margin in the second quarter was 21.2%, down 0.7 percentage points from the previous quarter. This was influenced by an increase in the cost of goods sold ratio due to rising raw material prices. Despite one-time costs related to accounting system improvements and increased advertising expenses due to marketing, the selling and administrative expense ratio decreased by 1.3 percentage points from the previous quarter to 40.3%.

Third-quarter sales are expected to grow 26% year-on-year to 267.8 billion KRW, with operating profit estimated to increase 45% to 51.3 billion KRW. Researcher Park said, "We expect solid performance in China and Russia. Although operating profit will decrease compared to the previous quarter due to 3 billion KRW in accounting system improvement costs and bad debt write-offs, normalization is expected from the fourth quarter onward." He analyzed, "Annual sales are projected at 1.04 trillion KRW, and operating profit at 218.7 billion KRW."