OP Set to Climb 28% y-y in 2022
The author is an analyst of NH Investment & Securities. He can be reached at pk.park@nhqv.co. -- Ed.
We expect Samsung Biologics to post 4Q21 sales of W422.2bn and OP of W136.3bn. In 2022, annual sales are primed to rise by 21% and OP by 28%. Investment plans are to be unveiled, starting with the JPM conference—2022 is the year when the firm re-enters a capex increase cycle.
OP set to climb 28% y-y in 2022
We maintain a Buy rating with a TP of W1,250,000 on Samsung Biologics. On a non-consolidated basis, we estimate 4Q21 sales of W422.2bn (+12% y-y) and OP of W136.3bn (+47% y-y). Of note, sales at plant #3 in 3Q21 were similar to that in 2Q21 due to the inclusion of certified production. In 4Q21, we believe that OPM at plant #3 narrowed slightly y-y on higher labor costs (in part due to expansion at plant #4). In 2022, earnings growth prospects look promising thanks to the complete commercialization for all plants on a reduction in the portion of initial products at plant #3. We see non-consolidated 2022F sales of W1.86tn (+21% y-y) and OP of W697.4bn (+28% y-y), with an OPM of 37%.
Investment plans to be unveiled, starting with JPM Healthcare Conference
The areas emphasized by Samsung Biologics at the 2021 JP Morgan (JPM) Healthcare Conference were capacity expansion, portfolio broadening, and regional diversification, including: 1) Songdo District 5: Multi-modality research and production base expansion; and 2) Songdo District 11: Likely aggressive capex spending in securing land 1.3x larger than at the existing campus, both of which were announced by Incheon City. The company’s 2022 JPM Healthcare Conference announcement is slated for Jan 13 at 07:15 KST.
We anticipate aggressive investment plans in response to solid demand at plant #4, with quantities for more than 20 products being under discussion. Once the government’s ‘Living with Covid-19’ measures resume, there should be even higher growth in cancer, autoimmunity, and CNS research. In November, we boosted our CMO value assumption for Samsung Biologics by changing our single antibody market annual growth rate estimate from 9.0% to 10.0%.
Unlike its competitors, Samsung Biologics’ capex spending has been in a steady downward cycle since the completion of plant #3 in 2017. We point out that CMO corporate value reflects capex investment ahead of performance. Samsung Biologics’ capex cycle is set to accelerate from 2022, during which the construction of plant #4 and a second campus are to be promoted, initiatives which will likely favorably influence the company’s share price.