Expect Strong Growth Momentum in 2H22
The author is an analyst of NH Investment & Securities. He can be reached at pk.park@nhqv.co. -- Ed.
Classys posted consolidated 2Q22 OP of W15.3bn, in line with consensus. Exports fell q-q, but should bottom out in 3Q22 on the back of approval momentum in overseas markets for its new equipment Shurink Universe. Also, sales commission expenses for new products should decline and sales growth for consumables has just started to rebound in the domestic market.
2Q22 OP meets consensus
We maintain a Buy rating and TP of W23,000 on Classys. The company reported consolidated 2Q22 sales of W32.7bn (+10.8% y-y) and OP of W15.3bn (-5.0% y-y), slightly below our estimate but in line with consensus.
Domestic: The firm sold 350 units of its new flagship device Shrurink Unverse in 2Q22 (vs 550 units in 1Q22). Its commissions-to-equipment sales ratio in the domestic market contracted from 14.3% (W1.7bn) in 1Q22 to 10.7% (W1bn) in 2Q22, driven by reduced sales to dealers and greater direct sales. Advertising expenses increased slightly q-q to W2bn, but should remain steady q-q in 3Q22 and downtrend in 4Q22.
Overseas: Both equipment and consumables sales fell q-q. The drop in sales is mainly attributed to sluggish orders from Brazil, as dealers in the country took a month break from ordering consumables for Ultraformer 3 after aggressively stockpiling inventory in previous months. We expect sales to Brazil to rebound from 3Q22 given the favorable market environment.
We project 2022E sales of W136.5bn (+36% y-y) and OP of W66.1bn (+28% y-y).
Expect strong growth momentum in 2H22 on: 1) overseas approval for Shurink Universe; and 2) launch of Volnewmer in Korea
We believe the key to Classys’s earnings growth is overseas equipment sales, which lead to higher consumables sales. Previously, Classys demanded a lofty P/E when equipment sales to China expanded in 2Q21. In major markets such as Brazil, where Ultraformer 3 has been sold since 2018, the approval process for Shruink Universe is underway.
In Korea, Volnewmer was recently approved by the Ministry of Food and Drug Safety. The goal is to sell 100 units within the year, with sales set to start in earnest from next year.