Meritz Securities on the 16th said Coway is the No. 1 player in the domestic rental market and is also showing growth in the global rental market. It set a target price of 150,000 won and a "buy" rating. The previous trading day's closing price for Coway was 93,600 won.
Coway is the overwhelming No. 1 player in the domestic rental market, with a 40% market share based on water purifier sales volume. Meritz Securities explained that Coway's market share is rising amid a recent easing of competition in the domestic rental market, and that trend-driven profitability improvement can be expected thanks to a rise in PPC (Product Per Consumer) and a decline in cancellation rates.
Park Jong-dae, a researcher at Meritz Securities, said, "Sales in Malaysia have surpassed 1 trillion won, beginning to write the success story of overseas expansion for the domestic rental business," and added, "It is posting high growth while holding an absolute market share in countries with strong mid- to long-term growth potential, such as Thailand and Indonesia."
Meritz Securities projected that Coway's third-quarter sales and operating profit on a consolidation basis will reach 1.233 trillion won and 238 billion won, up 12% and 15%, respectively, from a year earlier. In the domestic business, about 300,000 rental sales are expected, helped by the launch of the new Ice Water Purifier Mini. Park said, "Although top-line growth will slow somewhat from the second quarter, profitability will improve quarter over quarter due to a decline in sales commission rates."
Sales in the Malaysian and Thai markets are estimated to increase by 20% and 25%, respectively, from a year earlier. However, as both Indonesia and the United States resumed marketing that had been halted in the second quarter, the operating margin is expected to decline from the second quarter.
Park said, "Coway is carrying out a strong shareholder-return policy, including a 40% dividend payout ratio and share cancellations, supported by stable cash flow," and added, "The current dividend yield is 3.7%, which also offers additional investment merit."