To Start Construction of New Plant in Songdo Zone 5 from 2022
The author is an analyst of NH Investment & Securities. He can be reached at pk.park@nhqv.co. -- Ed.
We raise our TP on Samsung Biologics to W1,250,000 to reflect a hike in the value of its CMO business (by W16tn) in line with raised annual growth consensus (from 9% to 10%) for the global monoclonal antibody drug market. Of note, our valuation does not reflect Samsung Group’s ambitious investment plans. Forecasting a 22% y-y expansion in sales in 2022, we believe that the shares offer ample upside, even when excluding benefits from the group’s investment plans.
Raise TP to W1,250,000
Reiterating a Buy rating, we raise our TP on Samsung Biologics to W1,250,000 to reflect a W16tn hike in the value of the CMO business (for plants #1~4; from W57tn to W73tn) in line with raised annual growth consensus for the monoclonal antibody treatment market (9.0% → 10.0%). The monoclonal antibody drug market has enjoyed sustained growth in the fields of autoimmune, oncology, and Alzheimer’s disease, and as a result, consensus for market growth has risen from 8~9% to the low-10%-range. Meanwhile, Samsung Biologics is expected to raise its previous (released in 2020) sales guidance for individual plants on full capacity to reflect enhanced process efficiency. We point out that sustained earnings surprises confirm the enhanced sales capability of each plant.
In Aug 2021, Samsung Group announced an ambitious thee-year investment plan. While bio is included as one of its four main future businesses, related details are not available yet. According to the Incheon Economic Administration’s announcement on Nov 4, Samsung Biologics is to start construction of a new plant in Songdo Zone 5 from 2022. Though its capex-to-sales ratio has fallen below that of Lonza and Wuxiof late, Samsung’s capex is to ride a new upcycle from 2022. During its Capital Maket Day in October, Lonza unveiled its vision for its CDMO business and a 25% capex-to-sales ratio for 2021~2023, successfully stimulating market appetite for the stock. Against the backdrop of the tepid domestic bio sector, Samsung’s new 2022 investment will likely deserve strong attention. We note that our valuation for Samsung Biologics does not reflect the future investment momentum.
2022F earnings outlook
We forecast 2021 sales of W1,499.4bn (+29% y-y) and OP of W509.5bn (74% y-y). Given that plant #3 has been focused on production of initial products (not reflected in sales) and process performance qualification (PPQ) protocol this year, we expect sales and OP to jump to W1,831.9bn (22% y-y) and W679.8bn (33% y-y), respectively, on the plant’s full-fledged operations. Looking at plant #4, which targets partial operations from end-2022 and full operations from end-2023, it is known that amid a global shortage of monoclonal antibody CMO capacity, negotiations are underway with more than 25 clients regarding more than 30 products, with volume-related discussions progressing for more than 20 products. The firm is to kick off its CMO diversification efforts from 1H22, following completion of mRNA vaccine (DS) production capacity expansion.