[Click eStock] Samsung Biologics Exceeds Expectations... Rising Optimism for Factory Utilization Rate Increase

First Annual Sales Exceed 1 Trillion Won Since Establishment
Performance Growth Possible Due to Faster-than-Expected Factory Utilization Rate Expansion

[Asia Economy Reporter Minwoo Lee] Samsung Biologics posted earnings in the fourth quarter of last year that exceeded market consensus. It is analyzed that the utilization rate of Plant 3 is expected to reach its maximum this year, while growth will continue by focusing on order activities for Plant 4.

On the 27th, Yuanta Securities maintained a 'Buy' rating and a target price of 1.08 million KRW for Samsung Biologics. The closing price the previous day was 802,000 KRW. This is based on the judgment that earnings growth will continue this year following strong results in the fourth quarter of last year.

The day before, Samsung Biologics disclosed that its consolidated sales for the fourth quarter of last year reached 375.3 billion KRW, with an operating profit of 92.6 billion KRW. Compared to the same period last year, sales increased by 19.8%, while operating profit decreased by 13.4%. Both sales and operating profit exceeded consensus estimates by 45.3% and 76.7%, respectively. Total sales for last year were 1.1648 trillion KRW, surpassing 1 trillion KRW in annual sales for the first time in the company's nine-year history.

Sales increased as part of the production from Plant 3, which will be accounted for in the first quarter of this year, was recognized in the fourth quarter of last year. Sales are expected to increase further as plant utilization rates rise. In the fourth quarter of last year, plant utilization rates were 70% for Plant 1, full capacity for Plant 2, and mid-20% for Plant 3. In the first quarter of this year, Plant 1 is expected to operate at 60%, Plant 2 at full capacity, and Plant 3 at 50%. Although Plant 3's utilization rate was initially expected to be around 60% this year, it has rapidly increased since the fourth quarter of last year and is anticipated to operate near maximum capacity within the year.

Operating profit significantly exceeded consensus due to the operating leverage effect from increased sales. The operating profit margin also improved to 24.7%. Samsung Bioepis showed favorable results, but an equity-method loss of 8.9 billion KRW was recorded due to unrealized inventory losses. Despite the equity-method loss, net profit increased by 40.1 billion KRW to 96.2 billion KRW due to the impact of deferred corporate taxes.

Meanwhile, the Lucentis biosimilar (SB11) entered the sales approval review process with the European Medicines Agency (EMA) in November last year and the U.S. Food and Drug Administration (FDA) in December last year. The Prolia biosimilar (SB16) began global Phase 3 clinical trials in December last year.

Mi-hwa Seo, a researcher at Yuanta Securities, explained, "The faster-than-expected increase in Plant 3's utilization rate will significantly contribute to sales and operating profit growth," adding, "The cycle for regular plant maintenance will also lengthen (Plant 1 is currently undergoing regular maintenance, Plant 2 expected in 2022, and Plant 3 in 2024), which will reduce earnings volatility."