Solid Export Recovery in Progress
The author is an analyst of NH Investment & Securities. He can be reached at ryan.ra@nhqv.com. – Ed.
Although Classys is seeing a slow export recovery in Brazil, the firm’s exports outside of Brazil are believed to be normalizing alongside domestic sales improvement—factors which should help Classys to meet consensus. Over the mid/long term, we expect to witness both top-line growth driven by new product launches and profitability improvement from an increasing portion of consumables sales.
Enjoying sustained demand for aesthetic procedures
We maintain a Buy rating and TP of W21,000 on Classys. Despite the aftermath of Covid-19, healthy demand for aesthetic procedures has been confirmed to sustain wherever physical restrictions (eg, shutdowns and lockdowns) are absent. Moving ahead, we expect Classys to enjoy ongoing solid earnings growth from an expansion in domestic and overseas procedures. By yearend, Classys is forecast to release both Shurink Universe (upgraded version of HIFU device Shurink) and Volnewmer (non-invasive RF equipment). Over the mid/long term, we expect to witness both top-line growth driven by new product launches and profitability improvement from an increasing portion of consumables sales.
Solid export recovery in progress
On a consolidated basis, Classys should log 1Q21 sales of W21.3bn (-0.7% y-y, +2.0% q-q) and OP of W12.3bn (-8.6% y-y, +37.3% q-q), meeting the market projections. Thanks to a greater portion of high-margin consumables sales, GPM should arrive at 80.3% (+3.4%p q-q). Pushed up by the start of new advertising in March, advertising costs likely increased slightly. However, SG&A expense likely stabilized, helped by an absence of one-off items such as those reflected in 4Q20 (eg, consulting expenses related to corporate tax refund and incentive payout). We estimate that OPM climbed to 57.7% (+14.9%p q-q).
By region, we size 1Q21 domestic and exports sales at W8.0bn (-9.6% y-y, -2.0% q-q) and W13.3bn (+5.6% y-y, +4.5% q-q), respectively. Over January~February, domestic sales proved sluggish due to the continued impact of Covid-19, but from March, domestic sales were buoyed by new advertisement effects. Although export recovery to Brazil is progressing slowly, outside Brazil, exports are believed to have normalized in 1Q21 (continuing from 4Q20), helping to drive overall export growth.
By item, we estimate combined 1Q21 sales of medical devices (Classys) and beauty devices (Cluederm) at W10.6bn (+0.1% y-y, -1.6% q-q) and consumables sales at W10.3bn (-2.0% y-y, +5.1% q-q). Backed by increased accumulated sales of domestic and overseas equipment and continued demand for aesthetic procedures, consumables sales growth is believed to remain robust.