[Click eStock] Samsung Biologics, Growing Expectations for This Year's Performance

[Asia Economy Reporter Junho Hwang] Daishin Securities maintained a target price of 1.1 million KRW for Samsung Biologics, expressing a positive outlook despite the ongoing stock price fluctuations in the biotech sector since last year.

Samsung Biologics recorded consolidated sales of 444.3 billion KRW in the fourth quarter of last year, an 18.4% increase compared to the previous year. Operating profit reached 128.8 billion KRW, up 39.1% year-on-year. These results align with Daishin Securities' earnings estimates.

The improvement in performance is attributed to increased sales volume from Plant 2 and higher operating rates at Plant 3, resulting in an operating leverage effect. However, due to increased costs such as year-end special bonuses and commission payments, the operating margin decreased from 37.1% in the previous quarter to 29.0%.

The outlook for this year is also positive. Sales are projected at 1.904 trillion KRW, with operating profit expected to reach 641.5 billion KRW. Despite increased labor costs from workforce expansion and aggressive proactive investments, stable earnings growth is anticipated based on operational efficiency from full operation of Plants 1, 2, and 3 throughout the year.

In the first half of next year, mRNA DS production facilities are scheduled to begin operation. Starting with the supply of clinical trial reagents to Greenlight Bio, an expansion in mRNA drug orders is expected. Partial operation of Plant 4 will commence in the second half of this year. Ahead of Plant 4’s operation, contracts for orders of five products with three global pharmaceutical companies have been completed, and orders for more than 30 products are under discussion.

Notably, Samsung Biologics recently announced at the JP Morgan Healthcare Conference plans to start construction of Plant 5 within the first half of the year and to acquire the site for Plant 6. Furthermore, Samsung Biologics has established a shareholder return policy targeting about 10% of free cash flow over three years starting in 2025. From 2025, when operational efficiency of the currently expanding Plant 4 is expected, the company plans to distribute cash dividends totaling approximately 134 billion KRW over three years. This commitment to enhancing shareholder value is expected to have a positive impact on the stock price in the mid to long term.

Yunjin Lim, a researcher at Daishin Securities, stated, "The target price was calculated using the SOTP method by combining the operating value of 65 trillion KRW derived from DCF (Discounted Cash Flow) valuation and the equity value of Samsung Bioepis at 7.9 trillion KRW," adding, "We maintain a buy rating."