[Click eStock] "Dong-A ST, Positive Strong Performance but Lacks Investment Appeal"

[Asia Economy Reporter Park Jihwan] Samsung Securities on the 3rd evaluated that Dong-A ST has good performance but lacks long-term investment appeal. They maintained a 'Buy' investment rating and a target price of 100,000 KRW.

Seogeunhee, a researcher at Samsung Securities, said, "Operating profit exceeded consensus due to improved cost ratio from expanded product sales in Q3 this year," adding, "However, the lack of short-term research and development (R&D) momentum seems to reduce investment attractiveness."

On a separate basis for Q3, sales were 151.9 billion KRW and operating profit was 11.6 billion KRW, up 4.3% and 72.0% respectively year-on-year. The improved cost ratio due to increased sales of ethical drugs (ETC) led to operating profit growth despite increases in selling and administrative expenses and research and development (R&D) costs. ETC showed steady sales growth at 100.4 billion KRW, export of darbepoetin was deferred to Q4, and overseas sales were 30.1 billion KRW due to a reduced tuberculosis drug bidding market affected by COVID-19. Medical devices recorded 3.5 billion KRW due to the termination of some product contracts.

In Q4, sales of 158.9 billion KRW and operating profit of 3.3 billion KRW are expected, representing a 23.9% increase year-on-year and a return to profitability. Researcher Seogeunhee said, "Due to the volume-price linkage system, despite increased prescription volume, Q4 ETC sales are expected to be similar to Q3 levels." Exports deferred to Q4 are expected to recover, leading to a slight increase in total sales compared to Q3.

Researcher Seo forecasted, "Performance growth will be contributed by milestone receipts until 2023 and royalty receipts from sales after 2023."