Earnings Surprise
The author is an analyst of KB Securities. She can be reached at kahye.hong@kbfg.com. -- Ed.
4Q20 earnings surprise, with record quarterly revenue
— Samsung Biologics reported 4Q20 consolidated revenue of KRW375.3bn (+36.7% QoQ, +19.8% YoY) and OP of KRW92.6bn (+63.8% QoQ, -13.4% YoY). Both revenue and OP sharply exceeded consensus as well as our estimates.
— We attribute the earnings surprise to higher capacity utilization, recognition of sales for the company’s COVID-19 drug, and a shorter production cycle backed by technology transfers. Specifically, utilization amounted to 70% at Plant 1, 80% at Plant 2 (i.e., maximum), and the mid-20% range at Plant 3.
— NP improved QoQ despite unrealized inventory losses at subsidiaries.
Outlook for 2021: Focus on accelerating growth and early orders for Plant 4
— Samsung Biologics announced guidance for 2021E—with target revenue of KRW1.4tn (+20% YoY) and utilization rates of maximum levels (i.e., 80% for Plants 1 and 2; up to 80% for Plant 3).
— 2021E earnings should reach historic levels as all three plants operate at close to full capacity. In particular, a sharp increase in the utilization of Plant 3, which accounts for approximately 50% of total capacity, should propel earnings growth. As the company has already secured orders for all of its plants, earnings visibility is high.
— Early orders for Plant 4, which is currently under construction, coupled with the ongoing earnings growth should continue generating momentum for shares. The COVID-19 pandemic has sharply pushed up global demand for antibody drugs and a number of new antibody drugs are expected to hit the shelves in 2021. Given the favorable environment, Samsung Biologics is positioned to secure additional orders as the company boasts the world’s largest production capacity and stable manufacturing capabilities.