[Click eStock] "Coway, Triple Factors for Valuation Recovery... Target Price Raised"

Hanwha Investment & Securities raised the target price for Coway from the previous 98,000 KRW to 110,000 KRW on the 7th, stating that the three factors for valuation recovery are aligning. The investment rating was maintained as 'Buy.'

Coway announced its shareholder return policy for 2024 and 2025?2027 through a disclosure the day before. From 2024 to 2027, the total shareholder return fund will be about 40% of consolidated net income. In 2024, returns will be made to shareholders through year-end dividends and the cancellation of all treasury shares acquired (2.6%), and from 2025 onwards, through year-end dividends and the acquisition and cancellation of treasury shares.

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Researcher Lee Jin-hyeop said, "This is about twice the existing shareholder return policy of 40% of free cash flow (FCF) or a consolidated dividend payout ratio of 20%," adding, "Coway stated in its shareholder letter that thanks to shareholders' support for management's decisions, it was able to improve performance through enhanced competitiveness and secure financial soundness."

Lee also noted, "Coway's price-to-earnings (P/E) multiple was around 20 times in 2017 but experienced three rounds of de-rating," explaining, "This was due to concerns following successive major shareholder changes in 2017, the withdrawal and reduction of quarterly dividends in 2020, and the slowdown in growth and entry into an interest rate hike cycle in 2022?2023."

He continued, "Although the P/E ratio fell to about 6 times during 2023, it has recently recovered to around 8 times due to market share (M/S) expansion, growth rebound from overseas subsidiaries' turnaround, and entry into an interest rate cut cycle," adding, "Since Netmarble's acquisition of the company, the major shareholder governance structure has also stabilized to some extent, completing the final puzzle with strengthened shareholder returns."

However, the fourth-quarter operating profit is estimated to be 196.8 billion KRW, an 18.4% increase year-on-year, slightly below the initial consensus of 204.1 billion KRW.