[Click eStock] "BioPlus, High Profitability and High Growth Expected... Target Price Set at 39,000 Won"

[Asia Economy Reporter Minji Lee] Hanwha Investment & Securities initiated coverage on BioPlus on the 27th, issuing a buy rating and setting a target price of 39,000 KRW. This is based on the expectation of increased corporate value due to high growth and high profitability.

BioPlus is a company that researches, develops, produces, and sells hyaluronic acid (HA) application products. Looking at the main sales composition, filler sales account for the highest proportion at 82%. In the first quarter, BioPlus recorded sales of 12 billion KRW and operating profit of 5.6 billion KRW, growing 36% and 13.3% respectively compared to the same period last year.

Second-quarter performance is expected to continue strong results with sales of 13 billion KRW and operating profit of 6.1 billion KRW, representing growth of 38% and 20% year-on-year. The easing of mask-wearing regulations has led to a recovery of non-surgical procedures (petite plastic surgery) to pre-COVID-19 pandemic levels, and the use of Original Design Manufacturer (ODM) marketing cost pass-through is estimated to contribute to high profitability. Kim Hyungsoo, a researcher at Hanwha Investment & Securities, said, “It is positive that BioPlus is the only domestic filler using DVS (divinyl sulfone) as a crosslinking agent, which provides cost competitiveness, and that entry into the Chinese filler market is becoming visible.”

BioPlus is currently preparing to enter the Chinese filler market, starting with Hainan Province, a medical and tourism special zone in China. At the end of last year, it submitted a special permit application to the regulatory authorities of Hainan Province, and approval is expected as early as June. Hainan Province is a place where special pharmaceutical permits can be granted independently of the central government, and it is anticipated that preferential treatment will be possible when applying for central government approval in the future. Researcher Kim explained, “Since 2015, clinical trials have been required to prove efficacy and safety for product applications, raising the entry barrier in the Chinese filler market, making this a strategy to watch.”

Accordingly, the annual expected sales are 58.8 billion KRW and operating profit 28.6 billion KRW, both expected to grow about 57% compared to the previous year. It is anticipated that solid growth of existing HA filler products and expansion of sales from new products will enable over 50% growth and an operating profit margin around 50%, continuing the trend from last year.

The target price was calculated by applying a 40% discount to the PER (price-to-earnings ratio) of 41.7 times from 2015 to 2017, when three non-surgical procedure companies represented by botulinum toxin and fillers?Medytox, Humedix, and Hugel?were noted for high growth and high profitability. Researcher Kim analyzed, “Although BioPlus possesses proprietary technology, a high discount rate was applied due to its sales scale and status as a latecomer.”