Look to Companies with Strong DM Sales Portion
The author is an analyst of NH Investment & Securities. He can be reached at pk.park@nhqv.co. -- Ed.
Despite slow seasonality, exports of dental implants reached a record high in 1Q22. The chance of a slowdown in China due to Covid-19 is a risk. While sales of toxins and aesthetic devices are solid in DMs, the environment looks bearish in China. For both segments, we advise focusing on firms expecting a quick path regarding official sales approval from the Chinese government.
Dentistry: Implant exports to China reach new high in 1Q22, but risk of 2Q22 slowdown exists
In March, exports of dental implants totaled US$57mn (+15.7% y-y, +16.0% m-m). China, the largest export region, achieved a quarterly high of US$56.65mn (+18.5% y-y, -15.9% q-q) in 1Q22, even amid slow seasonality. However, despite the trend of strong q-q growth in 2Q, the possibility exists of a y-y growth slowdown in 2Q22 due to Covid-19. Russia, the second-largest export destination (US$6.23mn, -32.2% y-y), sustained negative y-y growth. War risks remain challenging to gauge, however, as sales climbed by about 50% m-m in both February and March.
In March, exports of dental imaging equipment logged a monthly high of US$27.22mn. China (US$6.6mn, +105.2% y-y), which has been sluggish recently, saw significant growth—a development that is largely attributable to the change from 2D to 3D X-ray equipment. Robust export expansion also continued to DMs such as the US (US$5.07mn, +35.4% y-y) and Europe.
Aesthetic medical devices: Exports to DMs strong, to China weak
In March, exports of aesthetic medical devices came to US$73.54mn (+22.2% y-y, +14.1% m-m). Leading growth were DM regions such as the US (US$13.76mn, +81.3% y-y) and France (US$4.47mn, +138% y-y). While long-term export growth to China (US$3.14mn, -40.6% y-y) remains clear, due to a short-term slowdown owing to regulation, a long-term investment perspective is required. While solid sales continue in DMs, slow sales have continued in China from January, and 2Q22 is likely to prove sluggish as well due to Covid-19 impacts. To Brazil (US$3.72mn, +162% y-y), where exports started off weak at the beginning of the year, a monthly export high was achieved. While aesthetics consumables to Brazil from Gangnam-gu in February totaled zero, the March figure reflects a recovery of full-fledged activity.
Toxins: US solid; China facing white market
Toxin exports in March topped US$20.88mn (-23.9% y-y, +52.2% m-m). Of note, March saw the highest toxin export volume of 2021, including to major destinations such as the US (US$3.9mn, -29.8% y-y) and China (US$1.24mn, -89.0% y-y). Compared to the US, which is displaying a growth trend, China has been on a clear downtrend since 4Q21 due to gray market contraction effects. Moving ahead, we advise focusing on expectations for China’s white market, which should drive growth for officially approved products.