52-Week Low on Expectations of Disappointing Q4 Results
Profit Forecast to Remain Flat This Year as R&D Investment Rises
Corporate Value Expected to Increase if R&D Achievements Are Confirmed
Due to last year's poor performance, Dong-A ST's stock price hit a 52-week low. The domestic energy drink pioneer 'Bacchus,' which had been thriving overseas, has faltered, and the pace of operating profit growth has slowed as the company continues to invest in new drug research and development (R&D). Market experts advise that it is a situation where we need to wait for results from the R&D sector.
According to the financial investment industry on the 15th, Dong-A ST's stock price fell 39.9% ten months after reaching a 52-week high of 88,000 won on March 7 last year. During the previous day's trading session, it briefly traded at 52,900 won, setting a new 52-week low again.
Dong-A ST, which was spun off from Dong-A Socio Holdings (formerly Dong-A Pharmaceutical) in March 2013, manufactures and sells prescription drugs, medical devices, and quasi-drugs. Its main products include a gastric mucosal protector (Styren), diabetes treatment (Suganon), and growth hormone (Grotropin). Bacchus is exported to countries except Vietnam.
As of the third quarter of last year, on a separate basis, the company recorded sales of 477.2 billion won and operating profit of 27.6 billion won. Sales increased by 8.6% compared to the same period last year, but operating profit decreased by 3.1%. Many market experts believe that the fourth-quarter performance last year was also sluggish, falling short of market expectations of 190.7 billion won in sales and 10.8 billion won in operating profit. Geunhee Seo, a researcher at Samsung Securities, explained, "It is estimated that sales of 163.4 billion won and operating profit of 6.3 billion won were achieved in the fourth quarter," adding, "This represents a decrease of 9.0% and 68.1%, respectively, compared to the previous quarter." He added, "Bacchus export sales likely decreased by 13.8% quarter-on-quarter to 39.7 billion won," and "there is no breakthrough in sight for performance recovery."
Hyemin Heo, a researcher at Kiwoom Securities, also analyzed, "It appears that Bacchus growth slowed in the fourth quarter of last year," and "R&D expenses in the fourth quarter were 28.3 billion won, not significantly reduced compared to the same period last year."
Samsung Securities estimates that Dong-A ST's performance will remain at a similar level this year as last year. They expect sales of 742.7 billion won and operating profit of 34.2 billion won. While sales are expected to increase by 15.9% compared to last year, operating profit is projected to rise by only 0.8%. The increase in R&D expenses for new drug development is expected to continue to prevent operating profit growth from keeping pace with sales growth.
There remains potential for corporate value to increase if concrete R&D results are demonstrated. Minjeong Kim, a researcher at DS Investment & Securities, said, "The results of the Phase 2a clinical trial for the metabolic disorder-related nonalcoholic steatohepatitis (MASH) treatment will be announced next month," adding, "If positive results are confirmed, the company plans to apply for the Phase 2b clinical trial investigational new drug (IND) application within the year."
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
