[Click eStock] Dentium, Expecting Normalization of China Sales... Target Price Up 23%

Korea Investment & Securities Report

On the 2nd, Korea Investment & Securities maintained a buy rating on Dentium and raised the target price by 23% from the previous level to 140,000 KRW. This is based on the analysis that sales in China will show a normalization trend starting from the second quarter.

Dentium recorded sales of 94 billion KRW and operating profit of 35.1 billion KRW in the fourth quarter, upwardly revised by 3.7% and 4% respectively compared to the previous quarter. Sales met market expectations, and operating profit exceeded them by about 9%. This was due to European sales centered on Russia increasing by 69% year-on-year to 22.4 billion KRW. Meanwhile, sales in China decreased by 20% during the same period to 42 billion KRW. A reversal of inventory valuation loss of 4 billion KRW was reflected in the cost of sales, and with improved cost ratio and efficient cost control, the operating profit margin was 37.3%.

Sales in China are expected to rebound in the first half of the year. This is because the easing of COVID-19 quarantine measures is expected to increase the number of dental visits and demand due to policies reducing implant procedure costs. As a result of the volume-based procurement (VBP) bidding, Dentium ranked second for grade 4 titanium. Songhoon Jeong, a researcher at Korea Investment & Securities, said, “Dentium’s bid price is 770 yuan, which is within the bid price range of the top four local Chinese companies (630?906 yuan), indicating high price competitiveness,” and added, “Based on quality competitiveness such as over 20 years of long-term clinical data, a high market share is expected to be maintained not only in the VBP market but also in the private medical institution market that does not participate in VBP.”

The company’s operating profit for this year is expected to be 150 billion KRW, and net profit is expected to be 10.4 billion KRW. Researcher Jeong explained, “Considering the reduced uncertainty of VBP, which was a factor hindering multiple increases last year, we have raised the operating profit and net profit estimates by 1.7% and 2.5%, respectively,” and added, “With efficient cost control, Dentium’s profitability will be maintained even after VBP implementation.”