[Click eStock] "Dongkook Pharmaceutical, Healthcare High Growth Outlook... Target Price Up"

Sangsangin Securities on the 27th raised the target price for Dongkook Pharmaceutical to 26,000 KRW, stating that "next year, the healthcare (cosmetics, daily necessities, health, functional foods) division will drive up the operating profit margin." The buy rating was also maintained.

On the same day, researcher Ha Taegi of Sangsangin Securities evaluated, "Dongkook Pharmaceutical's estimated consolidated sales this year are 729.3 billion KRW, with prescription drugs accounting for 25.5%, over-the-counter drugs 20%, and healthcare 32% (cosmetics 23%), showing balanced growth across all business sectors. In particular, healthcare showed high growth."

The forecast for Dongkook Pharmaceutical's operating profit margin was revised downward to around 9% this year. From 2018 to 2020, it was between 13% and 15%, and around 11% in 2021 and last year. Researcher Ha explained, "This is due to the impact of inflation and the high growth of the healthcare business in recent years. The healthcare business outsources manufacturing through original equipment manufacturing (OEM) without production, resulting in a relatively high cost ratio, and the high proportion of home shopping channels leads to higher selling and administrative expenses. Operating profit grows, but the operating profit margin declines."

In the healthcare business, the new beauty device Madeca Prime is leading growth. Currently, there are three product lines, with additional launches planned for next year. Madeca Prime's sales are estimated at 23 billion KRW this year, and the operating profit margin is expected to approach 20% (estimated) next year. Dongkook Pharmaceutical plans to reduce the proportion of cosmetics home shopping (currently in the mid-50% range) to the 40% range next year, suppress advertising expenses, and improve the profitability of the healthcare business, aiming to restore the overall consolidated operating profit margin to the 10% range.

Along with the overall stock market decline and a prolonged adjustment phase, the stock price has recently entered a recovery trend. In particular, Madeca Prime is expected to significantly contribute to next year's performance. Researcher Ha stated, "In this high-interest-rate era, the net cash assets on a consolidated basis as of the end of last September amount to 116.3 billion KRW. The price-to-earnings ratio (PER) based on next year's estimated earnings is about 10.6 times. Considering the growth potential of the healthcare business, the stock is undervalued. Now is the time to buy when evaluating changes for next year."