[Click eStock] "Dentium, Sales Growth in Export Countries and SG&A Efficiency"... Investment Opinion and Target Price Up

[Asia Economy Reporter Lee Jung-yoon] Daol Investment & Securities upgraded its investment opinion on Dentium from Buy to Strong Buy and raised the target price from 110,000 KRW to 160,000 KRW on the 9th, citing solid sales growth in major export countries and operating leverage resulting from SG&A efficiency.

In the second quarter of this year, Dentium recorded its highest-ever performance with sales of 96.7 billion KRW, up 33% year-on-year, and operating profit of 35.2 billion KRW, up 109%. Despite the Shanghai lockdown, normal operations were maintained in the outskirts and nearby areas of China. In Russia, shipments delayed in March normalized in April, exceeding the target of 7 billion KRW by achieving 5 billion KRW, and India is also gradually returning to normal.

The SG&A ratio improved by 9.8 percentage points from the previous quarter to 33.6%, largely due to fixed cost effects and marketing efficiency. Fixed costs such as labor and R&D expenses increased at a lower rate than sales growth. Additionally, advertising expenses decreased by 4.4 billion KRW from the previous quarter to 3 billion KRW, which could be interpreted as a reduction in marketing activities due to the Shanghai lockdown; however, it is analyzed that this reflects efficient advertising expenditure through a combination of online and offline education.

For the third quarter of this year, Dentium's sales are expected to increase by 40% year-on-year to 99.5 billion KRW, and operating profit is projected to rise by 126% to 34.1 billion KRW. Stable growth centered on China is anticipated, with deferred demand after the lockdown expected to translate into sales. Although sales in Russia are expected to decline quarter-on-quarter due to a high base effect from the March deferral, sales of 8 billion KRW are expected.

Park Jong-hyun, a researcher at Daol Investment & Securities, explained, "Maintaining the operating profit margin through operating leverage is key," adding, "No large-scale hiring is planned for the second half of the year, and bad debt write-offs are expected to remain at current levels." He further stated, "Therefore, except for a sharp increase in advertising expenses, there are no factors that would damage the operating profit margin, and advertising expenses are expected to be maintained at the current level."