China-led Export Growth Remains Valid
The author is an analyst of NH Investment & Securities. He can be reached at ryan.ra@nhqv.com. – Ed.
Although its advertising costs will likely expand due to greater off-line marketing, Dentium should continue to post solid earnings thanks to domestic sales recovery and strong exports growth centering on EMs. Dentium has the largest Chinese exposure among domestic dental implant companies. Seeing no burden in its current share price, we recommend increasing exposure to Dentium.
China-led export growth remains valid
Adhering to a Buy rating, we raise our TP on Dentium from W83,000 to W90,000. We calculate an EV of W999.4bn by applying a target P/E (average 12-month forward P/E of domestic and overseas dental implant companies) of 21.6x to 12-month forward NP (excluding minority interests) of W46.2bn.
Based on import/export customs clearance data of the Korea Customs Service, implant export growth to China has sustained for about a year, with the highest monthly export figure ever recorded in June. Dentium, which boasts the largest portion of exports to China among domestic implant companies, is anticipated to enjoy brisk export growth to EMs in 2H21. We recommend loading up on Dentium shares, believing that the firm is attractively valued compared to other domestic implant plays.
Harmonization of domestic demand recovery and high export growth
On a consolidated basis, Dentium should register 2Q21 sales of W68.4bn (+32.9% y-y, +27.2% q-q) and OP of W14.1bn (+113.1% y-y, +32.7% q-q; OPM of 20.6%), with both figures arriving in line with consensus. Although advertising costs will likely expand due to greater off-line marketing (eg, related to participation in SIDEX and the Henan Healthcare Expo in China), both sales and OP should show improvement on the back of rapid export growth to EMs such as China and Russia.
Domestic sales should arrive at W15.0bn (+3.0% y-y, +25.1% q-q) in 2Q21. At SIDEX, Bright CT and unit chairs sold out, confirming favorable effects for bundled equipment + dental implant sales. Domestic sales are to show recovery driven by a rebound in domestic implant surgery demand.
Looking at exports, 2Q21 sales should total W53.4bn (+44.9% y-y, +27.8% q-q). Exports to other regions such as Southeast Asia and the Middle East are recovering, and exports to China and Russia remain solid. We estimate China and Russia sales at W38.4bn (+30.2% y-y, +32.5% q-q) and W5.4bn (+80.0% y-y, +11.6% q-q), respectively. Recently, domestic dental implant companies, including Dentium, have been boosting their exports to Turkey. We highlight Turkey as one country deserving of greater attention in the future.