[Click eStock] "Samsung Biologics, Focus on Plant 4 Over Short-Term Performance"

[Asia Economy Reporter Song Hwajeong] Shinhan Financial Investment maintained a 'Buy' rating and a target price of 1,000,000 KRW for Samsung Biologics on the 12th, stating that although the company's first-quarter earnings this year are expected to be sluggish, the stock price will be more influenced by the impact of Plant 4 than by short-term earnings.

Samsung Biologics' first-quarter performance is expected to be somewhat weak. Shinhan Financial Investment estimated Samsung Biologics' consolidated first-quarter sales and operating profit at 280.5 billion KRW and 72.9 billion KRW, respectively. These figures represent increases of 35.4% and 16.5% compared to the same period last year. Researcher Lee Dong-geon of Shinhan Financial Investment explained, "Based on market consensus, sales are expected to fall short by 10% and operating profit by 14%. Compared to the previous quarter, sales are projected to decrease by 25.3% and operating profit by 21.2%." This weak performance is due to the rapid revenue recognition of production from Plant 3, which caused some of the revenue that should have been recognized in the first quarter of this year to be reflected in the fourth quarter of last year. Additionally, the decline in operating rate due to the regular maintenance of Plant 1 in December last year was inevitable. The researcher added, "However, these two factors are temporary," and "Samsung Biologics' performance is expected to trend upward in the second half of the year."

Annual consolidated sales and operating profit for this year are estimated at 1.4601 trillion KRW and 399.8 billion KRW, respectively, representing increases of 25.4% and 36.5% compared to the previous year. The researcher analyzed, "There are no scheduled regular maintenance periods for Plants 1 to 3 this year, and the operating rate of Plant 3 continues to increase each quarter," adding, "The average annual operating rates by plant this year are expected to improve significantly compared to last year, with Plant 1 at 73.3%, Plant 2 at 78.5%, and Plant 3 at 72%."

Since the first-quarter earnings slump was already anticipated, its impact on the stock price is considered limited. The researcher stated, "This year's stock price will be influenced more by the Plant 4 event, which will serve as a momentum for high earnings growth in the future, rather than by short-term earnings," and added, "Stock price increases are expected based on the momentum of new orders for Plant 4, which will begin in earnest from the second half of 2021 to the first half of 2022."