20170124-三星证券-Export_growth_to_have_boosted_earnings_in_4Q_43页_1mb

Sector Update Summary: Medical Devices

Core Content

This document provides an analysis of the Korean medical device sector, with a focus on the performance and valuations of several key companies. It highlights the expected earnings for 4Q16, export growth, and valuation metrics for the companies in the dental implants and medical imaging segments. The report is from Samsung Securities, dated 2017.1.24, and includes target prices, financial estimates, and comparisons with peers.

Main Points

Expected 4Q16 Results

• Overall Sector Performance: The medical device sector is expected to have solid results in 4Q16, except for Dio.
• Export Growth: Korea's medical device exports to China are projected to increase by 26.1% y-y and 38.3% q-q, with dental implants seeing a 63.9% y-y and 71.6% q-q growth.
• Key Company Performance:
  • Osstem Implant: Combined sales for North America, Europe, and Asia (excluding China) are expected to rise by 29.9%, with shares dropping 25.1% for the year after the Beijing operation suspension.
  • Viewworks: Expected to exceed forecasts due to robust sales in industrial-use cameras and solid domestic sales.
  • Osstem Implant: Sales and net profit are projected to beat the consensus.
  • Dio: Missed forecasts due to the reduction of low-quality clients and increased SG&A costs.

Target Prices and Valuations

• Osstem Implant: Target price KRW84,000 (upside 42.4%).
• Dio: Target price KRW49,000 (upside 22.7%).
• Viewworks: Target price KRW80,000 (upside 14.1%).
• Vatech: Target price KRW49,000 (upside 41.0%).
• Rayence: Target price KRW22,000 (upside 26.4%).

Financial Estimates (2016E and 2017E)

• Sales: Osstem Implant is expected to have the highest growth in 2017E, with KRW398.9b.
• Operating Profit: Viewworks and Osstem Implant are expected to outperform the consensus.
• EBITDA: All companies are projected to see growth in 2017E.
• Net Profit: Expected to increase across the board, with Osstem Implant leading.
• Valuation Metrics:
  • P/E Ratio: Osstem Implant is projected to have a P/E ratio of 21.4x in 2017E.
  • P/B Ratio: Rayence has the lowest P/B ratio at 1.5x in 2017E.
  • EV/EBITDA: Rayence has the lowest EV/EBITDA ratio at 7.7x in 2017E.

Peer Comparison

• Dental Implant Makers:
  • Osstem Implant: Share price KRW59,000, Market Cap KRW843b.
  • Dio: Share price KRW39,950, Market Cap KRW606b.
  • Global Peers: Include companies like Straumann, Danaher, and Dentsply Sirona.
• Medical Imaging Makers:
  • Vatech: Share price KRW34,750, Market Cap KRW516b.
  • Viewworks: Share price KRW70,100, Market Cap KRW701b.
  • Global Peers: Include GE, Philips, and Siemens.

Key Information

• Export Trends: Korea's medical device exports to China have shown significant growth in 4Q16, despite concerns about THAAD-related slowdowns.
• Performance Variations: While Osstem Implant and Viewworks are expected to perform well, Dio's performance is weaker due to client issues and cost burdens.
• Valuation Analysis: Osstem Implant is the top pick due to its strong performance and potential for rebound.
• Market Data: Includes financial metrics such as sales, operating profit, net profit, EPS, P/E, P/B, and EV/EBITDA for both Korean and global peers.
• Return Analysis: The document also provides return data for various time frames, highlighting the performance of each company.

Conclusion

The medical device sector in Korea is showing positive growth, particularly in exports to China. Osstem Implant is highlighted as the top sector pick, with strong expectations for sales and profit growth. Viewworks and Vatech are also expected to perform well, while Dio faces challenges. The report suggests that investors should monitor export data and company-specific performance to gauge the sector's health and potential for future growth.