[Click eStock] Pharmaresearch, Target Price Lowered Amid High Growth and Correction Range... Investment Appeal Remains

[Asia Economy Reporter Lee Seon-ae] SangSangIn Securities stated on the 2nd that regarding Pharma Research, the buy recommendation for stock price increase from a mid- to long-term perspective remains valid, but the target price is lowered from 120,000 KRW to 110,000 KRW. The stock price rose to the 100,000 KRW range in August 2021, driven by strong earnings growth, but experienced a long-term correction down to the 70,000 KRW range due to issues with its subsidiary’s toxin business. Since then, due to improved earnings and stock market uncertainties, it has shown weakness within a box range of 60,000 to 90,000 KRW.

Researcher Ha Tae-gi of SangSangIn Securities emphasized, "Although the stock price has recently declined, the high-growth story of Rejuran, Conjuran, and cosmetics remains valid," adding, "Although it was excluded from the innovative pharmaceutical companies this time, the impact on corporate value is considered minimal. If the stock price fell because of this, it is expected to recover over time." He continued, "As of the end of March 2022, cash and cash equivalents (including non-current assets) amount to 198.5 billion KRW, with borrowings of 63 billion KRW, resulting in net cash assets of 135.5 billion KRW. It is a highly profitable company with an operating profit margin of 34-35%," and added, "Especially during a period of rising interest rates, having a large amount of cash assets appears to enhance stability. The buy recommendation remains valid from a long-term perspective."

The medical device division is driving high growth. The medical device division consists of the filler Rejuran, arthritis treatment Conjuran, and HA filler, and data for these are combined and reported as the medical device division. The estimated sales composition ratio for the medical device division is approximately 53% Rejuran, 40% Conjuran, and 8% HA filler. First, Rejuran (filler) saw increased growth with the launch of new products (Rejuran HB plus, with added lidocaine) in October 2021, and HA filler is also growing.

The high growth of the arthritis treatment Conjuran continues. It is analyzed that sales are growing rapidly due to cooperative sales with SK Chemicals and OEM sales from Daewon Pharmaceutical. Thanks to the strong performance of Rejuran and Conjuran, medical device business sales reached 76.2 billion KRW for the full year 2021 (52.4% growth) and 22.7 billion KRW in the first quarter of 2022 (32.0% growth), showing high growth. High growth is expected to continue in the second half of 2022, with annual medical device division sales projected to increase by 24.0% to 94.5 billion KRW.

The pharmaceutical division is expected to grow steadily at around 10%. The main products in pharmaceuticals are PDRN drugs and botulinum toxin. Notably, in December 2021, the company applied for domestic product approval for the botulinum toxin product Lientox Injection (100 units), aiming for approval within 2022. So far, toxin sales have been export-only, but if approved, domestic sales of Lientox will begin from 2023. Therefore, stable growth in the pharmaceutical division is expected to continue. Pharmaceutical sales grew 20% to 12 billion KRW in the first quarter of 2022, with similar sales expected in the second quarter.

The cosmetics (PDRN) business is also progressing smoothly, though on a smaller scale. It grew to 27.1 billion KRW in 2021 (61.3% growth). Although there is volatility in exports, mid-teens percentage growth is expected in 2022 as well.