Letybo Expected to Debut in Chinese Market Within 2H20
The author is an analyst of NH Investment & Securities. He can be reached at ryan.ra@nhqv.com. -- Ed.
Benefiting from the revoking of the domestic sales license for a rival’s main product, Hugel is to cement its leading position in Korea’s BTX market. Earnings should improve gradually from 2H20, backed by rising exports of cosmetics to China and likely Chinese approval (2H20) for Letybo.
Earnings to improve gradually
We initiate coverage on Hugel at Buy, with a SOTP-derived TP of 610,000. We size EV at W2,535bn, reflecting operating value of W1,713.4bn (target P/E of 29.1x applied to 12M FWD NP (excl minority interests) of W58.8bn) and non-operating value of W821.5bn (ie, global market value of Letybo (botulinum toxin injection). We see consolidated 2020E sales of W214.7bn (+4.9% y-y) and OP of W70.2bn (+3.0% y-y; OPM of 32.7%). While 2020 figures will likely miss guidance (sales growth of 10~13% y-y; OP growth of 10~15% y-y) due to the Covid-19 crisis, earnings should improve gradually from 2H20, backed by rising exports of cosmetics to China and likely Chinese approval (2H20) for Letybo.
Stands atop domestic BTX and filler markets
Hugel has been the number-one player (in terms of market share) in the domestic Botulax (BTX) market for four years in a row. And, launched last year, the company’s HA filler product (The Chaeum) has risen directly to top spot in the domestic filler market. Hugel is to be the main beneficiary of a recent government decision to revoke the domestic sales license for a rival’s main product.
Upon receiving a request from China’s National Medical Products Administration (NMPA) in April, Hugel submitted supplementary documents regarding Letybo on Jun 9. Letybo is expected to receive the final approval and make its Chinese market debut within 2H20.
Over the next 2~3 years, Korea’s BTX market is to be flooded with a variety new BTX products. With rising competition to heighten price-cutting pressure at home, Korean BTX players are turning their eyes to overseas markets. Hugel plans to submit new drug applications (NDAs) for Letybo in Europe and the US in 2H20. Following likely entry into China in 2020, Hugel’s products are to hit other major overseas markets going forward (Europe in 2021; the US in 2022).