[Click eStock] Kolmar Korea Transforms into Pharmaceutical Company, Preparing for HK Innoen IPO... Full of Momentum

[Asia Economy Reporter Lee Seon-ae] Yuanta Securities announced on the 18th that it maintains a 'Buy' rating and raises the target price to 64,000 KRW for Korea Kolmar, expecting improved performance as it transforms into a pharmaceutical company.

Korea Kolmar's Q4 results recorded consolidated sales of 341.1 billion KRW (YoY -2%) and operating profit of 45.3 billion KRW (YoY +100%), exceeding consensus by 70%. This was thanks to the surprising performance of its subsidiary HK Innoen. Additionally, pre-tax profit approached 180.6 billion KRW (YoY +1546%) due to the gain from the sale of the pharmaceutical consignment division.

Korea Kolmar is gradually transforming into a pharmaceutical company. Its subsidiary HK Innoen posted sales of 175 billion KRW (YoY +19%) and operating profit of 38.6 billion KRW (YoY +75%), with an operating margin reaching 22%. The strong sales of high-margin proprietary new drug ‘K-Cap’ and smallpox vaccine (YoY +19%) contributed to improved cost ratios, while the decline in operating activities due to COVID-19 was identified as a cause for the rise in operating margin.

Now, HK Innoen is the main driver of the stock price. The pharmaceutical segment's share of consolidated operating profit was around 45% in 2018 but rose to 85% by Q2 last year. For the full year 2020, it reached approximately 74%. Korea Kolmar aims to list HK Innoen within this year. With increasing sales of proprietary new drugs, solid performance is expected, and momentum is likely to be further supported by clinical progress of key pipelines. Major pipelines include treatments for autoimmune diseases and NASH (non-alcoholic steatohepatitis), currently undergoing domestic Phase 1 and European Phase 2 clinical trials, respectively. The cosmetics division's performance is also recovering from a low point, with a bright outlook for 2021.

Researcher Park Eun-jung stated, "We forecast 2021 consolidated sales of 1.5 trillion KRW (YoY +11%) and operating profit of 150 billion KRW (YoY +34%)," adding, "There seems to be no reason not to buy."