No. 5 Plant May Be Built Overseas
The author is an analyst of KB Securities. He can be reached at kimtaehee@kbfg.com. -- Ed.
Maintain BUY, target price of KRW1,200,000
We maintain BUY and TP of KRW1,200,000 on Samsung Biologics. The stock deserves attention because (1) 3Q22 earnings should beat the market consensus, (2) growth momentum should come from the addition of No. 4 plant and continual capacity increases and (3) Samsung Bioepis should benefit from a second wave of biosimilars in 2H23. Samsung Biologics presents stability and strong earnings amid high market uncertainty.
3Q22 forecast: OP to beat market consensus
We forecast 3Q22 revenue at KRW815.5bn (+80.9% YoY) and OP at KRW232.5bn (+38.9% YoY), which is above the market consensus. We note that the significant YoY growth is meaningless, as it is attributable to the consolidation of Samsung Bioepis in 2Q22. We see strong earnings based on (1) high utilization rates at No. 1-3 plants (at full capacity in 2Q22), (2) ASP jump from product mix improvement, (3) favorable KRW/USD (+15.7% YoY, +6.4% QoQ) and (4) milestone payments from a Humira biosimilar’s FDA approval.
Part of No. 4 plant now online; contribution to earnings expected from 2H23
Recently, 25% of No. 4 plant’s capacity (60k of 240k liters) came online. Based on time needed for technology transfer, production of samples (to be submitted for approval) and processing approval, the plant should begin contributing to earnings from 2H23. Once No. 4 plant is fully operational, the company’s total capacity will stand at 604k liters (No. 1: 30k; No. 2: 154k; No. 3: 180k), which will secure the company’s position as the world’s largest biopharma CMO.
No. 5 plant may be built overseas
According Fierce Pharma (Oct 6), Samsung Biologics is looking to establish an overseas plant, perhaps in the U.S. A future No. 5 plant in the U.S. would significantly reduce concerns created by the U.S. National Biotechnology and Biomanufacturing Initiative.