[Click eStock] "Spigen Korea, Disappointing Operating Profit Margin Defense"

On the 21st, IBK Investment & Securities downgraded the target price of Spigen Korea to 38,000 KRW, stating that while the valuation is attractive, the defense of operating profit margin is always disappointing.

In a report on the same day, researcher Geonjae Lee of IBK Investment & Securities explained, "The reason why Spigen Korea's operating profit margin has continuously declined since its listing is due to the increase in selling and administrative expenses. At the time of listing, selling and administrative expenses accounted for 32.4% of sales, but as of the end of the first half, it has steadily risen to 58.9%." He added, "The main cause of the sharp rise in selling and administrative expenses appears to be the increase in commission rates paid to Amazon. Currently, Spigen Korea seems to be paying commission rates of about 30-34% to Amazon."

Spigen Korea currently sells about 60-70% of its total volume through the Amazon channel, and although sales through other channels are also ongoing, it is evaluated that it is difficult to secure distribution channels that can overwhelm or match Amazon in a short period of time.

The researcher said, "Spigen Korea's 12-month forward earnings per share (EPS) is 9,418 KRW, which corresponds to a price-to-earnings ratio (PER) of about 3.5 times based on the current stock price of 32,500 KRW." He added, "From a valuation perspective, it is sufficiently attractive, but recently, EPS has improved due to strong financial income outside of operating profit, which is somewhat disappointing in terms of regaining market investors' interest."

He further stated, "Unless there is a strong shareholder-friendly policy such as dividend expansion or share buyback and cancellation, it is judged that it will be limited to regain market interest in the short term." He also forecasted, "In terms of operating profit, there will be no further sharp decline in profit margin, but it is limited to find a clear improvement plan for the operating profit margin."