3Q22 Preview: Earnings to Meet Expectations
The author is an analyst of NH Investment & Securities. He can be reached at pk.park@nhqv.co. -- Ed.
We expect Dentium to report 3Q22 sales of W91.8bn and OP of W30.6bn. In China, VBP bidding prices are likely to be released in October~November. Results of the bidding are to determine Dentium’s earnings and EV in the days ahead.
3Q22 preview: Earnings to meet expectations
We maintain a Buy rating and TP of W120,000 on Dentium. We expect the firm to post 3Q22 sales of W91.8bn (+29.0% y-y) and OP of W30.6bn (+102.6% y-y), with both figures to slightly miss consensus. In China and Russia, the company’s major export destinations, sales are estimated to reach W51.1bn (+15.0% y-y) and W8.4bn (+250.0% y-y), respectively.
Dentium is forecast to log 2022E sales of W379.9bn (+30.3% y-y), OP of W130.6bn (+86.8% y-y), and OPM of 34.4%.
Sales trend in China to be determined by results of VBP bidding
The volume-based procurement (VBP) policy of China’s National Health Insurance Administration, which has drawn significant market attention as of late, is currently in the preparatory stage (August~December), with companies now making their tender offers. As the price guidelines for dental implant consumables are set to be released after standardizing prices in each region of China by the end of November this year, the VBP bidding results are likely to be revealed in October~November or sooner.
As 40% of Dentium’s sales in China occur through dealers and the eventual extent of the discount from VBP to the current prices will remain difficult to infer until bidding offers are disclosed, dealers have little motivation to stock up on dental implants at this time. With this in mind, we conservatively estimate the company’s 2H22 earnings.
Based on the examples of VBP pilot operation in Chinese cities such as Ningbo and Bengbu, we expect the price for a dental implant set (fixture + abutment) to settle at around RMB1,000, which is similar to the current ASP. However, it is still too early to be certain of the bidding price that will be standardized across all regions of China. Looking ahead, the results of the bidding are likely to determine the company’s sales performance and EV.