Korean bio CMO earnings outlook bright this year, but stocks so far not so sunny

2021.05.03 12:09:57 | 2021.05.03 15:37:53

[Photo provided by SK Bioscience Co.]이미지 확대

[Photo provided by SK Bioscience Co.]

South Korean bio contract manufacturing organizations (CMO) are expected to perform better this year, but their stocks nevertheless have not been all sunny.

Shares of SK Bioscience Co. and Samsung Biologics Co. gained 26.14 percent and 7.49 percent, respectively, in April, while shares of Celltrion Inc. and GC Pharma lost 18.03 percent and 6.1 percent each.

Foreigners and institutions, each, net purchased about 80,000 and 330,000 shares in Samsung Biologics but net sold around 110,000 and 1.05 million shares in Celltrion during the period. As for SK Bioscience, offshore investors net sold 310,000 shares but institutional investors net bought 220,000 shares.

For GC Pharma, institutions net sold 150,000 shares while foreigners net purchased 50,000 shares, which was not big enough to offset institutional selling.

Analysts recently turned upbeat about Samsung Biologics and GC Pharma although first-quarter results were below the market consensus.

Samsung Biologics reported an operating profit of 74.3 billion won in the first three months, up 19 percent from a year earlier. Sales gained 26 percent on year to total 260.8 billion won.

“Samsung Biologics by the end of last year ran factories on 60 percent of its full capacity due to maintenance work at the first plant,” said Lee Dal-mi, an analyst at SK Securities. “The utilization rate rose in the first quarter, with the third plant now running at 60-70 percent from 50 percent late last year, and its overall utilization rate is expected to continue to rise, helping it earn higher earnings in the latter half.”

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GC Pharma’s operating profit in the quarter ended March fell 18 percent on year to 5 billion won, with sales down 8.3 percent to 282.2 billion won due to a fall in vaccine sales from the lower-than-expected influenza cases in the southern hemisphere this year, said Huh Hye-min, an analyst at Kiwoom Securities.

“But as vaccine sales are expected to increase, and Moderna’s sales will likely resume in the second half of the year, the company should see brilliant earnings improvement if it resumes CEPI supplies in the first half and signs on vaccine CMO,” added Huh.

Covid-19 cure and vaccine manufacturers Celltrion and SK Bioscience will likely be swayed by related issues.

“Celltrion this year is supposed to produce 1.3 million doses of Covid-19 antibody treatment this year. When combining with last year’s production of 100,000 doses, the company is projected to earn 840 billion won this year,” said Sun Min-jung, an analyst at Hana Financial Investment.

One big risk for Celltrion stock is a surge in Celltrion stock margin balance for short selling, analysts warned.

Analysts’ stock price target for Samsung Biologics averaged 981,667 won, Celltrion 370,833 won, and GC Pharma 485,714 won.

On Monday, Samsung Biologics shares finished 3.86 percent lower at 773,000 won, and Celltrion 6.2 percent down at 249,500 won. GC Pharma shares closed 0.74 percent up at 341,000 won, while SK Bioscience fell 1.64 percent to end at 149,500 won.

By Kang Bong-jin and Lee Ha-yeon

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