[Click eStock] "Growth Prospects for Dong-A Socio Holdings Subsidiary... Target Price Maintained"

Sangsangin Securities maintained a "Buy" rating and a target price of 130,000 KRW on the 20th for Dong-A Socio Holdings, stating that "the increase in corporate value of the unlisted subsidiaries Dong-A Pharmaceutical and STGEN Bio, which have an absolute impact on the corporate value of the holding company Dong-A Socio Holdings, is expected."

On the same day, researcher Ha Tae-gi of Sangsangin Securities said, "The estimated corporate value of Dong-A Pharmaceutical based on next year's estimated net profit is evaluated at around 800 billion KRW. The current market capitalization of Dong-A Socio Holdings is only in the 600 billion KRW range, so it is significantly undervalued even if only the value of Dong-A Pharmaceutical is reflected." He added, "If STGEN Bio's performance improves significantly next year, the burden of new capital supply as a holding company could be reduced, and the stock price could level up."

Regarding Dong-A Pharmaceutical, he analyzed, "Operating performance is on a high growth trend. This year's annual sales are expected to be 623.9 billion KRW, a 14.9% increase from last year, and operating profit is expected to increase by 19.3% to 80.1 billion KRW." He forecasted, "Next year's sales will increase by 12.5% to 702 billion KRW, and operating profit will increase by 11.6% to 89.3 billion KRW." The main businesses can be divided into Bacchus, over-the-counter drugs, and health and wellness business, with recent high growth centered on health and wellness. Orthomol, a high-dose vitamin imported from Germany, is leading the growth in the health and wellness sector.

Regarding STGEN Bio, he said, "Although it has been a burden on the holding company until this year, it will provide expectations next year," adding, "Next year's sales are expected to be 65 billion KRW, and operating profit is expected to be positive. This will create a positive momentum for the stock price of the holding company Dong-A Socio Holdings." The effect of facility expansion is also anticipated. Researcher Ha said, "First, the bioreactor for biosimilar production will be increased by an additional 1,000 liters, bringing production capacity to 9,000 liters. The number of production batches increased from 30 batches last year to 50 batches this year, and is expected to increase to 80 batches next year."

He explained, "Looking at STGEN Bio's operating performance, CDMO (Contract Development and Manufacturing Organization) sales of Nespa biosimilar are recorded at 28 billion KRW, bringing this year's total company sales close to 50 billion KRW, with operating losses estimated at around 8 billion KRW. Although prices sold in Japan are decreasing, sales volume is increasing, resulting in overall sales growth. This is a factor in the increase of CDMO sales from STGEN Bio's perspective." He also added, "Commercial production of Stelara biosimilar is scheduled to begin in the second half of next year," and "With the increase in commercial production volume of Nespa biosimilar and the addition of Stelara biosimilar commercial production next year, high sales growth and operating profit are expected."

The stock price of Dong-A Socio Holdings remained in a box range of 90,000 to 110,000 KRW last year but fell to around 76,000 KRW in July. Since then, as the performance of the unlisted key subsidiary Dong-A Pharmaceutical has grown significantly, the stock price has recovered to the 90,000 KRW range and is currently consolidating. Dividends included an interim dividend of 1,000 KRW this year, with an expected year-end dividend of 1,000 KRW plus alpha. Dividends are trending to increase significantly compared to 1,500 KRW last year.