[Click eStock] COVID Crisis Becomes Opportunity... Daewon Pharmaceutical's Earnings Smile

Operating Profit Expected to Increase by Over 200% in Q2 This Year

[Asia Economy Reporter Ji Yeon-jin] Hanwha Investment & Securities announced on the 10th that it maintains a buy rating and a target price of 25,000 KRW for Daewon Pharmaceutical, forecasting improved earnings for the company in the second quarter of this year.

Daewon Pharmaceutical is expected to record consolidated sales of 118 billion KRW in the second quarter of this year, a 34.5% increase compared to the same period last year. Operating profit is anticipated to rise by 214.9% to 14.1 billion KRW. This is attributed to strong sales of cold medicine and antipyretics continuing into the second quarter following the spread of the COVID-19 Omicron variant in the first quarter.

Kim Hyung-su, a researcher at Hanwha Investment & Securities, stated, "Sales of the Pelubi series and KoDaewon series in the second quarter are expected to reach 12.7 billion KRW and 13.5 billion KRW, growing 60.8% and 221.4% year-on-year, respectively." He added, "Although a decline in sales of related pharmaceuticals is inevitable if the current downward trend of COVID-19 continues, attention should be paid to the expanded sales network of the company in the first half of the year. Due to the nature of the pharmaceutical distribution structure, it is not easy for hospitals and pharmacies where prescriptions and sales have started to switch to other products, so the company's sales competitiveness is expected to continue into the second half."

The company recorded sales of 117.1 billion KRW in the first quarter of this year, a 56.1% increase compared to the same period last year, and operating profit turned positive at 13.9 billion KRW. Since January this year, amid the rapid increase in domestic COVID-19 cases, the Pelubi series (antipyretics) and KoDaewon series (cough and expectorant medicines) grew by 90.6% and 242.9%, respectively, driving strong performance.

Daewon Pharmaceutical, which had strengths in respiratory medicines, saw its performance shrink with the onset of the COVID-19 pandemic. Sales in 2020 were 308.5 billion KRW, a 2.9% decrease compared to the previous year. However, last year, the company overcame its weaknesses by recovering to 354.2 billion KRW, a 14.8% increase year-on-year, thanks to prescriptions for chronic disease medicines and hospital expansion.

Sales this year are expected to increase by 26.2% year-on-year to 447 billion KRW, with operating profit rising 134.1% to 45.5 billion KRW.