20170428-三星证券-Solid_growth,but_profitability_disappoints_11页_485kb

i-SENS (099190) Company Update Summary

Core Content

i-SENS, a South Korean company, reported its first-quarter (1Q) results for 2017, showing solid growth in sales but disappointing profitability due to a product-mix deterioration. The company's performance was driven by increased shipments of blood glucose meters, especially in North America, but its operating and net margins declined.

Key Points

• Sales Growth: i-SENS reported sales of KRW32.1b for 1Q17, representing a 22.2% year-over-year (y-y) increase.
• Profitability Concerns: Operating profit rose 15.1% y-y to KRW6.6b, but net profit fell 12.3% y-y to KRW4.1b. The net margin dropped 5% pts to 12.6% due to forex losses.
• Market Performance: The stock price was at KRW30,500, with a target price of KRW38,000 and a market cap of KRW418.49b. The stock has underperformed compared to the Kosdaq index over the past year.
• Guidance: Full-year guidance for 2017 remained unchanged, with expectations of 24.6% sales growth and 17.7% operating profit growth. However, the operating margin is projected to decrease slightly due to startup and acquisition costs.
• China Operations: i-SENS China's sales increased by 24% y-y to KRW1.9b, and the company is awaiting approval to commence production and sales in China, which could boost its share price.
• EPS Projections: 2017E EPS is projected at KRW1,542, down from 2016's KRW1,664, and 2018E EPS at KRW1,946, down from 2017E's KRW2,077.

Key Changes

• Recommendation: Remains at BUY.
• Target Price: Unchanged at KRW38,000.
• EPS Growth: 2017E EPS growth is 3.8% y-y, and 2018E EPS growth is 26.2% y-y.
• Profitability: Pre-tax profit and net profit both showed declines compared to forecasts.

Valuation Summary

Regional Performance

• North America: Sales surged 115.7% y-y to KRW13.7b.
• Asia: Sales fell 18.4% y-y to KRW9b.
• Korea: Sales increased 17% y-y to KRW5.4b.
• Europe: Sales dropped 9.3% y-y to KRW3.4b.
• Other Markets: Sales jumped 47.8% y-y to KRW4.5b.

Share-Price Momentum

• The company's share price has shown mixed performance over different time frames.
• i-SENS is expected to benefit from its expansion into China, where it plans to achieve local sales of KRW5ob by 2020 and KRW1ob in exports.

Financial Ratios

Income Statement Highlights

• Sales: Increased from KRW101b in 2015 to KRW148b in 2017E.
• Gross Profit: Rose from KRW45b in 2015 to KRW60b in 2017E.
• Operating Profit: Increased from KRW23b in 2015 to KRW30b in 2017E.
• Net Profit: Increased from KRW17b in 2015 to KRW21b in 2017E.
• EPS: Increased from KRW1,217 in 2015 to KRW1,542 in 2017E.

Balance Sheet Highlights

• Total Assets: Increased from KRW172b in 2015 to KRW222b in 2017E.
• Total Liabilities: Increased from KRW37b in 2015 to KRW45b in 2017E.
• Equity: Increased from KRW136b in 2015 to KRW177b in 2017E.
• Net Debt: Decreased from (2.1) in 2015 to (0.9) in 2017E.

Compliance Notice

• As of April 27, 2017, the analysts did not hold any shares or convertible debt instruments in the companies covered.
• Samsung Securities' holdings would not exceed 1% of any company's outstanding shares if debt instruments were converted.