The author is an analyst for NH Investment & Securities. He can be reached at pk.park@nhqv.com -- ed.
Samsung Biologics should post healthy 4Q23 earnings. We attribute the firm’s recent share price rise to an easing of valuation burden (based on 2025F EV/EBITDA) and the potential for antibody market growth. Expansion of plant #6 will be important for the shares to break out from the current box range. Eyes should be on Alzheimer’s ADC antibodies and new modality news.
4Q23 preview: Earnings to arrive solid
We maintain a Buy rating and TP of W950,000 on Samsung Biologics. On a non-consolidated basis, we adhere to our previous 4Q23 estimates, forecasting sales of W824.8 (+10% y-y) and OP of W324.9bn (+5% y-y).
Although it is hard to gauge its number of production batches, we size Samsung Biologics’ 2H23 portion out of 2023 sales at 58% (vs guidance of 60%), keeping our sales projection intact. Following its 3Q23 sales surprise, the firm likely saw q-q sales contraction in 4Q23, considering one-off factors such as compensation for non-fulfillment of client contracts. At plant #4, 4Q23 sales likely came to W109.4bn (up W78.1bn q-q).
We anticipate consolidated 4Q23 sales of W1.08tn (+12% y-y) and OP of W319.9bn (+2.3% y-y), in line with our previous forecasts. We estimate that via consolidated adjustments, sales and OP fell by W44.7bn and W12.5bn, respectively, while PPA came to W55bn.
With multiples unburdensome, keys to be industry news and confirmed expansion of plant #6
On a non-consolidated basis, we forecast 2024 sales of W3.32tn (+13% y-y) and OP of W1.35tn (+13% y-y). We note that our 2025F EV/EBITDA of 24.0x sits in line with the average of 20.1x for peers such as Thermo Fisher and Danaher. We attribute the firm’s recent share price rise to an easing of valuation burden.
Confirmation of plant #6 expansion (set for 2025) will be key for the shares to break out of the current box range, but attention should also be given to news of antibody market growth and new modalities related to plant #6. With bio indices climbing as of late, we note the Dec 1 Evercore conference, at which Danaher commented that: 1) the annual outlook for 2024 should be communicated in January; 2) the biotech CMO business is stabilizing; and 3) opportunities are likely to emerge in the production of new Alzheimer’s disease drugs.