Large-scale Order Intake Has Begun after a Lull
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. Our investment highlights are (1) 3Q22 earnings beat, (2) secured growth drivers via the recent start of operations at No. 4 plant and continual capacity expansion, and (3) expectation for subsidiary Samsung Bioepis to benefit from a second wave of biosimilars starting in 2H23.
3Q22 earnings surprise
Samsung Biologics posted solid 3Q22 results, with revenue of KRW873.0bn (+93.7% YoY) and OP of KRW324.7bn (+94.0% YoY), beating the recently increased market consensus. We note that a YoY comparison is meaningless because Samsung Bioepis earnings were not reflected in 3Q21. Samsung Bioepis revenue came in at KRW269.7bn, in line with our estimate of KRW266.1bn, thus Samsung Biologics standalone revenue constituted the earnings surprise. On a standalone basis, Samsung Biologics revenue hit a quarterly high, surging 49.7% YoY to KRW674.6bn; OP climbed 86.2% YoY to KRW311.4bn.
Favorable FX effect, hike in ASP
We attribute the earnings surprise to (1) a favorable FX effect, (2) a hike in ASP on product mix improvement, (3) higher revenue from finished drugs and (4) a milestone KRW30.0bn inflow for high-concentration Humira biosimilar following the drug’s FDA approval.
Large-scale order intake has begun after a lull
With the recent start of operations at No. 4 plant, Samsung Biologics has begun taking in orders in earnest (incl. a KRW420.7bn CDMO contract signed with GSK equivalent to 26.8% of 2021 revenue). We see further large-scale CDMO order wins given that there is potential for amyloid beta-targeted Alzheimer’s disease treatments (e.g., Biogen’s Lecanemab) to be commercialized.