[Featured Stock] Kolmar Korea Rises on HK Innoen Growth and IPO Expectations

[Asia Economy Reporter Lee Seon-ae] Kolmar Korea is on the rise.

As of 9:30 AM on the 18th, Kolmar Korea is trading at 54,900 KRW, up 4.77%. Earlier in the session, it surged to 56,200 KRW.

This is interpreted as due to the growth and listing expectations of its subsidiary HK Innoen.

On this day, Yuanta Securities stated that as Kolmar Korea transforms into a pharmaceutical company, its performance is expected to improve, maintaining a 'Buy' rating and raising the target price to 64,000 KRW.

Kolmar Korea's Q4 results showed 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, with the gain from the sale of the pharmaceutical contract manufacturing division reflected, pre-tax profit approached 180.6 billion KRW (YoY +1546%).

Kolmar Korea is gradually transforming into a pharmaceutical company. Its subsidiary HK Innoen recorded 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 drug ‘K-Cap’ and smallpox vaccine (YoY +19%) contributed to improved cost ratios, and the decline in operating activities due to COVID-19 is understood to be a cause of the increased operating margin.

Now, the stock price driver is HK Innoen. The pharmaceutical segment's share of total operating profit was about 45% in 2018 but rose to 85% by Q2 last year. For the full year 2020, it reached approximately 74%. Kolmar Korea aims to list HK Innoen within the year. With proprietary drug sales on an upward trend, solid performance is expected, and progress in key pipeline clinical trials is likely to add momentum. 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, so the outlook for 2021 is expected to be bright.