(Graph 4)

The cost-to-sales ratio has seen a significant increase, rising from 32% in 2020 to 40% in 2021. This is primarily due to three main reasons.

Firstly, the sales mix has shifted towards products with higher profit margins. As a result, the company's product sales have increased by 8 percentage points, accounting for 38% of total sales in Q1 2022. The product sales have a significant impact on the overall cost-to-sales ratio, as they account for 77% of the total.

Secondly, the raw material costs have risen sharply, increasing by 6.5 percentage points from 44% to 51%. This is mainly due to the increase in raw material prices, which has had a significant impact on the company's profitability.

Thirdly, the discount rate has increased, rising from 8% to 11%. Although this may seem like a small increase, it still accounts for a significant amount of sales, approximately 100 billion won. The company is expected to return to its previous levels after the promotional activities end.

(Graph 5)

The cost-to-sales ratio is not the only metric that has seen an increase. The operating expenses have also risen significantly, increasing by 15 billion won in Q1 2022 alone. This is primarily due to the company's intentional decision to increase its advertising spend, which now stands at approximately 176 billion won.

(Graph 6)

The net profit margin has decreased to 6%, which may seem like a negative development. However, upon closer examination, it becomes clear that this is a deliberate strategic move aimed at securing sustainable growth in the face of rising raw material prices and increasing competition. The company's management has made a conscious decision to invest in research and development, which will ultimately benefit the company in the long run.

As shareholders, we should be patient and allow the company's strategy to unfold. The company may choose to strengthen its existing businesses, launch new products, or invest in research and development. Alternatively, it may decide to acquire other companies or sell off underperforming assets. As investors, our job is to trust the company's management team and their vision for the future.

The cost-to-sales ratio has risen due to a combination of factors, including an increase in product sales, raw material costs, and discounts. However, upon closer examination, it becomes clear that this is a deliberate strategic move aimed at securing sustainable growth. As shareholders, we should be patient and allow the company's strategy to unfold.

Future Analysis

I plan to update my analysis of the company's growth, profitability, and asset values in the coming days. Please refer to my previous article for more information on this topic: Reference 1