Although Celltrion posted record-high earnings on January 19, its share price plummeted due to a foreign brokerage house report that raised questions about its profitability in the future. As the report suggested less than 30% of the current share price as its target price, citing problems of how R&D costs were applied, close to four trillion won (US$3.6 billion) vanished from the company’s market capitalization.
In the KOSDAQ stock market, Celltrion’s stock price closed at 287,800 won (US$259), down 9.87% from the previous day. The stock price, which surpassed 300,000 won on November 11 of 2017, dipped to 200,000 won (US$180) in just one week. Its market capitalization which was 39.167 trillion won (US$35.2 billion) on the previous day, nosedived to 35.303 trillion won (US$31.7 billion).
The stock prices of Celltrion Healthcare and Celltrion Pharmaceutical also slid 7.88% and 9.82%, respectively, and the market capitalization of the Celltrion Group fell by more than five trillion won (US$4.5 billion).
The sharp decline of the stock prices of the Celltrion trio is blamed on an analysis report by Deutsche Bank. Han Sang-hee, a Deutsche Bank researcher, called in question the Celltrion Group’s profitability in his January 18 report.
"The capitalization of R&D costs by the Celltrion Group eclipses those of its peers in the world," researcher Han pointed out. The proportion of direct R&D expenditure was only 27%. Han forecast that Celltrion would hardly maintain an operating margin of 57% recorded in 2016 and the percentage was expected to fall to 35%. Deutsche Bank joined Nomura Securities Co. which had previously expressed its recommendation to sell Celltrion stocks.
Researcher Han set Celltrion's target price at 82,700 won (US$78) and that of Celltrion Healthcare at 40,800 won (US$36). Celltrion's target price was less than one-third of the closing price of 319,300 won (US$287) on the precious day.
In this regard, "The report is conveying a distorted view of the analyst," Celltrion said. In particular, Deutsche Bank suggested 87,200 won (US$78) as Celltrion's target price and it was unfair for Deutsche Bank to have been maintaining the target price without applying earnings improvements since the target price was announced in March, Celltrion claimed.
Meanwhile, around 2 pm on the day, Celltrion announced that the company posted 828.9 billion won (US$746 million) in sales and 517.4 billion won (US$465 million) in operating profit in 2017 according to provisional calculation. Operating profit surged 104.7% year on year, proving that the company chalked up record-high business performances.
After the earnings announcement, Celltrion's share price rebounded slightly to the 300,000 won (US$270) level but the rebound stopped and the stock price went downward after less than 15 minutes. The stock price which dropped to 284,000 won (US$255) ahead of the close of the market slightly rebounded at the last minute.