[Click eStock] "Ostem Implant, Time to Escape Undervaluation"

[Asia Economy Reporter Jang Hyowon] Daishin Securities analyzed on the 25th that Ostem Implant only has growth ahead this year and that it is time to break out of the undervalued range. The target stock price was raised to 240,000 KRW.

Han Songhyeop, a researcher at Daishin Securities, stated in a report on the same day, “One of the factors that blocked valuation rerating, the China implant volume-based procurement (VBP), showed results within the expected range, alleviating concerns,” and explained, “2023 is a period when Ostem Implant’s performance strength changes, and the valuation burden is also limited.”

He continued, “Considering the resolution of China VBP risk and the removal from the watchlist (March), we raise the multiple,” and analyzed, “Given the high growth rate and profitability compared to global peers, there is no reason for it to be traded at a significant discount.”

Additionally, the researcher said, “The fourth quarter sales last year are expected to be 282.3 billion KRW, and operating profit 54.5 billion KRW, in line with consensus,” and added, “Considering the unexpectedly strong fourth quarter sales to China, we raise the previous estimate.”

Furthermore, he added, “Since 2019, conservative accounting treatment and a consistent quarterly provision allocation policy have limited the one-time cost risk in the fourth quarter, which was an uncertainty factor,” and “An operating profit margin of 20.6% is expected for 2022.”

The analysis also states that only growth remains this year. He said, “Sales in 2023 are expected to be 1.2466 trillion KRW, and operating profit 266.8 billion KRW,” and forecasted, “The price decline due to VBP will be offset by the high growth of the China implant market and volume increase from the VBP effect.”

He added, “Based on the strength of being ranked 4th in the global implant market share and 1st in both the China and domestic markets, top-line growth will continue,” and predicted, “With abundant cash that can be used for mergers and acquisitions (M&A) strategies, efficient dental doctor training programs, and domestic and international dental networks, the growth trend can be sustained.”