Outstanding Competitiveness
The author is an analyst of NH Investment & Securities. She can be reached at jy.lee@nhqv.com. -- Ed.
Zinus boasts a long track record and outstanding competitiveness unrivalled by sector late comers. With the sales portion for Europe and other overseas markets (excluding the US) estimated to climb to 20% next year, we forecast that Zinus will see valuation re-rating as a global online consumer goods play. We also note that the firm’s production base is located in Indonesia, where tariff rates are low.
Long track record and outstanding competitiveness
We initiate coverage on Zinus with a Buy rating and TP of W115,000. Our TP was derived by applying the global sector average P/E of 20x to 12M fwd NP and applying a 25% discount for the domestic market. It offers 32% upside from the Oct 30 closing price of W87,400.
In line with global online market growth, Zinus’s mattress-in-a-box and furniture-in-a-box products are expected to enjoy structural growth. While the company has a number of competitors, as the first firm to successfully commercialize mattress-in-a-box technology, Zinus boasts a long track record and outstanding competitiveness unrivalled by late comers.
Strong growth in Europe and other overseas markets; Indonesia production base benefits from low tariff rates
In 3Q20, Zinus displayed strong sales growth in Europe and other overseas markets. By country, the firm’s sales rose 461%y-y in Australia, 138%y-y in Canada, and 543%y-y in the EU. As of end 3Q20, the YTD sales portion for Europe and other overseas markets (excluding the US) reached 12% (+6%p from 3Q19’s 6%) and the portion is estimated to climb to 20% next year. We forecast that Zinus will see valuation re-rating asa global online consumer goods play.
On Oct 28, the US Department of Commerce made a preliminary decision on anti-dumping cases for seven countries, and it levied a 2.61% tariff rate for Indonesia where Zinus’s production base is located, thereby eliminating tariff risks for Zinus. Tariff rates stand as high as 252.74% for Cambodia, 42.92% for Malaysia, 13.65% for Serbia, 572.56~763.28% for Thailand, and 190.79~989.90% for Vietnam. The high tariff rates for other countries place Zinus in an advantageous position over peers in terms of price competition.