Sound exports to Brazil and China
The author is an analyst of NH Investment & Securities. He can be reached at ryan.ra@nhqv.com. – Ed.
We expect Classys’s 2Q21 sales and OP to beat consensus by 16.0% and 22.7%, respectively, led by recovering domestic demand and rapid export growth. Exports to Brazil and other countries are in good shape, marking an improvement from 1Q21. It is also worth paying attention to China exports, as they likely reached an all-time high.
Focus on effects of new product launches and strong export growth
We maintain a Buy rating on Classys and raise our TP from W21,000 to W26,500. We calculate EV at W1,714.9bn by applying a target P/E of 29.7x (average 12M FWD P/E for major domestic beauty care players) to 12M FWD NP of W57.8bn.
We expect to see strong export growth, led by Brazil and China. Exports to other countries should also be sound. Assuming there are no restrictions, such as shutdowns or lockdowns in export destinations, we forecast solid export growth going forward. Also positive, Classys plans to release Shurink Universe at end-2021 and Volnewmer in 1H22. We predict that new product launch and export growth effects will continue over the mid/long term.
Sound exports to Brazil and other countries; also pay attention to China
Classys should register consolidated 2Q21 sales of W28.4bn (+94.7% y-y, +33.3% q-q) and OP of W16.7bn (+162.0% y-y, +53.1% q-q; OPM of 58.7%), beating consensus by 16.0% and 22.7%, respectively. We believe that domestic demand recovered and exports grew rapidly. Also, sales of consumables with a low cost ratio likely increased on the back of rising aesthetic procedures at home and abroad.
By region, we estimate domestic 2Q21 sales and exports at W9.6bn (+4.1% y-y, +24.6% q-q) and W18.8bn (+249.5% y-y, +38.2% q-q), respectively. The effects of new advertising continued through April, and domestic sales appear to have entered a recovery phase on rebounding demand for aesthetic procedures. Exports to Brazil and other countries that account for a large portion of exports, should show solid growth, marking an improvement from 1Q21.
According to aesthetic medical device export data from the Korea Customs Service in Gangnam-gu, Seoul, 2Q21 exports at Classys amounted to US$16.7mn (+318.4% y-y, +42.0% q-q), including record-high exports to China of US$4.9mn (+1,508.5% y-y, +230.2% q-q). Through the Chinese SNS trend, it was confirmed that interest in Shurink has recently increased. We expect this trend to have a positive effect on global marketing as the brand’s position rises via word of mouth in China.