[Click eStock] "Jinyang Pharm's Real Estate Value is 2.4 Times Market Cap... CMO Expected to Grow 34% Annually"

ValueFinder diagnosed on the 12th that Jinyang Pharmaceutical is in an undervalued range where the real estate value alone amounts to 2.4 times its market capitalization. It also analyzed that high growth in the biopharmaceutical contract manufacturing organization (CMO) division and expansion in the diabetes market are expected.

Jinyang Pharmaceutical is a pharmaceutical manufacturing and sales company, ranking 5th among major KOSDAQ-listed pharmaceutical companies in Korea based on sales last year. The sales composition by major business divisions as of last year is classified as prescription drugs (ETC) 77.8%, CMO 19.2%, and over-the-counter drugs (OTC) 3.0%. Among the major ETC products, Crivix, a cardiovascular drug, is a key cash cow for the company, generating monthly sales of over 900 million KRW.

Researcher Seo Ji-hyuk of ValueFinder stated, "Sales of Jinyang Pharmaceutical's CMO division are expected to grow at an average annual rate of 33.9%, increasing from 5.8 billion KRW in 2019 to 25 billion KRW this year," and analyzed, "The proportion of CMO sales to total company sales is expected to expand from 12.2% in 2019 to 20.1% this year."

He continued, "The growth factors for the CMO division are attributed to securing new products and clients not only for existing hyperlipidemia treatments but also for diabetes and hypertension treatments this year," adding, "Since the company has secured external growth drivers through the CMO business, which is considered a stable new growth engine for mid-sized pharmaceutical companies, momentum and valuation attractiveness are expected to be highlighted going forward."

Researcher Seo said, "We expect Jinyang Pharmaceutical to expand in the diabetes market," explaining, "The company launched a generic drug in the market after the patent for AstraZeneca's sodium-glucose co-transporter 2 (SGLT-2) inhibitor Forxiga (active ingredient dapagliflozin) expired in April last year."

Additionally, he said, "Diabetes-related sales generate about 15 billion KRW annually, and the company aims for sales of 4 billion KRW by 2026," adding, "The goal is to increase market share for dapagliflozin and glimepiride, whose domestic market size is approximately 160 billion KRW."

He stated, "The company announced a decision in May this year to acquire tangible assets worth about 85 billion KRW in buildings, and it is understood that the value of the office building currently used by the company is about 35 billion KRW. The real estate appraisal value of these two tangible assets alone amounts to approximately 150 billion KRW," adding, "Considering the company's market capitalization is 63.2 billion KRW, the real estate appraisal value alone can explain the company's market capitalization."

He also noted, "The company issued 16 billion KRW of the first tranche of convertible bonds (CB) in November 2021 but exercised the call option, so the remaining convertible bonds held by the company are about 8.67 billion KRW," diagnosing, "Although there is an overhang risk, even if all convertible bonds are converted into shares, the company's price-to-earnings ratio (PER) as of 2024 would be in the 4.9 times range, indicating an undervalued phase."