The author is an analyst of NH Investment & Securities. He can be reached at pk.park@nhqv.co. — Ed.
Classys is forecast to post 4Q22 sales of W38.2bn and OP of W18.9bn. In terms of equipment, 4Q22 likely saw domestic sales of 100 units of Shurink Universe and 80 units of Volnewmer, and Brazil sales of 150 units of Shurink Universe. As a higher COGS-to-sales ratio from an increased equipment sales portion should be offset by limited ad spending, the firm’s 4Q22 earnings should meet consensus.
4Q22 preview: OP to meet consensus
We maintain a Buy rating and TP of W23,000 on Classys. We forecast 4Q22 sales of W38.2bn (+51% y-y) and OP of W18.9bn (+66% y-y), with both figures to meet consensus.
In 4Q22, domestic sales of Shurink Universe likely reached 100 units, with sales of consumables starting to pick up in earnest thanks to a 30% hike in cartridge ASP and the ending of free coupons for cartridges. In 4Q22, domestic sales for Volnewmer are estimated at 80 units. Backed by the full-fledged start of Volnewmer sales, the equipment portion of total domestic sales likely topped 52%, driving up COGS-to-sales ratio.
Overseas, steady sales growth likely continued for both equipment and consumables, with an emphasis on Brazil. According to the Korea Customs Service’s export data, sales of equipment to Brazil from Gangnam-gu (where Classys is located) grew significantly in October and November, which can be attributed to the launch of Shurink Universe in Brazil. In 4Q22, Shurink Universe sales in Brazil are estimated at 150 units, with the equipment share out of exports projected at 57%.
In 4Q22, COGS-to-sales ratio likely climbed to 25.0% due to an increase in the equipment portion out of domestic and overseas sales and inventory valuation losses. Advertising expenses are estimated at W800mn, down from 3Q22, and SG&A-to-sales ratio is estimated at 25.6%, similar to the previous quarter.
Moderate growth expected in 2023
On a consolidated basis, we expect 2023 sales of W170.6bn (+22% y-y) and OP of W88.7bn (+30% y-y). In 2022, OPM likely dipped slightly due to the launch of new equipment, but in 2023, OPM should recover to 52% thanks to a rise in the portion of consumables sales and ASP increase. Currently preparing for clinical development in the Chinese and US markets, which are expected to be the company’s main growth markets, Classys is anticipated to release a plan for Chinese clinical trials as early as mid-2023.
