No More Doubts... Samsung Biologics' 4Q Last Year Operating Profit Up 830%

CMO Business Boom... Sales Up 37% YoY
Strong Performance Expected This Year... Sales Approaching 1 Trillion Won

[Asia Economy Reporter Minwoo Lee] Samsung Biologics' operating profit in the fourth quarter of last year surged by 830% due to the strong performance of its Contract Manufacturing (CM) business. With factory utilization rates further increasing, sales this year are expected to approach 1 trillion KRW.

On the 24th, Korea Investment & Securities raised its sales rating to "Buy" and increased the target price by 15% to 510,000 KRW, citing Samsung Biologics' "earnings surprise" in the fourth quarter of last year. Analysts suggest that if this trend continues, joining the 1 trillion KRW sales club is within reach. The closing price the previous day was 483,000 KRW.

In fact, Samsung Biologics' sales in the fourth quarter of last year reached 313.3 billion KRW, a 76% increase compared to the same period the previous year. Operating profit soared even more during the same period, recording 107 billion KRW, an 830% increase year-on-year. The operating profit margin reached 34%.

Jinhung Kook, a researcher at Korea Investment & Securities, explained, "Since production of high-priced products was temporarily concentrated in the fourth quarter, it may be somewhat difficult to record sales in the 300 billion KRW range every quarter going forward. Nevertheless, this case clearly demonstrates the operating leverage effect of Samsung Biologics' CMO business. Given that the operating profit margin was 30% in the fourth quarter of 2017 as well, with increased utilization rates of Plants 1 and 2 and full reflection of Plant 3 sales, strong performance is expected again this year."

Korea Investment & Securities forecasts that Samsung Biologics will achieve sales of 959 billion KRW and operating profit of 172 billion KRW this year. This represents a 37% increase in sales and an 88% increase in operating profit compared to last year. With continued improvement in Bioepis' performance, net profit is also expected to rise by 30% to 263 billion KRW.

Researcher Jin said, "Samsung Biologics, which has been listed for five years, is now looking toward 1 trillion KRW in sales. This performance will serve as an opportunity to alleviate some of the doubts about the company's consistent cash-generating ability."