[Click e-Stock] "Chong Kun Dang, Temporary Profitability Slowdown... R&D Momentum to Emerge Soon"

Target Price Lowered

On July 17, KB Securities maintained its "Buy" investment rating on Chong Kun Dang, but lowered its target price by 15% from 130,000 won to 110,000 won, citing a recent temporary slowdown in profitability.

Kim Hyemin, a research analyst at KB Securities, explained, "The adjustment in the target price reflects changes in the third-quarter COE by the KB Securities Research Center, which led to an increase in WACC from 6.76% to 7.29%, as well as downward revisions to operating profit forecasts for 2025 and 2026."

For the second quarter on a standalone basis, the company is expected to post sales of 425 billion won (up 10.4% year-on-year and up 6.5% quarter-on-quarter) and operating profit of 20.6 billion won (down 27.5% year-on-year, up 60.3% quarter-on-quarter, with an operating margin of 4.8%). These figures are largely in line with consensus estimates (+1.4%, -1.5%).

Kim noted that "existing major products such as Gliatilin, Atozet, and Dilatrend continue to show steady growth." However, she analyzed that "the decrease in operating profit was influenced by a higher cost ratio (estimated at 69.2% in the second quarter) due to the increased sales proportion of newly introduced products such as Godex and Fexclu." She also added, "The estimated clawback amount related to Gliatilin continues to be reflected, so the company is still going through growing pains at this stage."

However, she projected that this year will mark the beginning of a full-fledged research and development (R&D) momentum. Kim emphasized, "The most notable R&D momentum is the approval of phase 2 clinical trials and indication disclosure for the HDAC6 inhibitor CKD-510, which was licensed out to Novartis at the end of 2023." She highlighted that "the value of this new drug is expected to be fully reflected in Chong Kun Dang's corporate value."

She further added, "If the initiation of phase 1 clinical trials for c-MET ADC CKD-703, developed using Synaffix's ADC (antibody-drug conjugate) technology, and research progress in major pipeline assets such as EGFR/c-MET bispecific antibody CKD-702 are confirmed, there is ample room for additional upside."

Kim concluded, "Now, in addition to stable growth in its core business, attention should be paid to Chong Kun Dang's value as a company with strong R&D momentum."