[Hidden Market Picks] Undervalued CKD set to gain most among Korean bio peers

2018.06.20 09:34:58 | 2018.06.20 10:20:57

To meet growing interest and demand in Kosdaq, venture, and smaller-cap shares in Korea, Pulse will supply news and information on relatively lesser-known stocks to our readers with the help of our analysts` pool.

We will filter out stocks from analysts reports and add data from Financial Services Commission and Korea Exchange to better help investors` judgment.

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South Korea’s drug maker Chong Kun Dang Pharmaceutical Corp. (Kosdaq: 185750)stock is a recommended buy as it remains undervalued despite its strong product pipeline.

CKD’s operating profit for the second quarter ending June 30 is expected to jump 15.3 percent to 18.8 billion won ($17 million) from a year ago period and its sales on path to gain 8.3 percent on year to 228.5 billion won, according to a report by Hanyang Securities Co. on Tuesday.

For full 2018, the company is projected to book 82.2 billion won in operating profit on sales of 940.9 billion won - both the highest-ever when actualized.

The drug maker has been expanding new product lineups for large markets such as drugs for treating cancers and chronic ailments after investing nearly 100 billion won annually in recent years in R&D projects. It also has won the highest number of clinical trial approvals in the country. Its new product Prevenar 13 - Pfizer’s pneumococcal vaccine that it is co-marketing with the Korean unit of U.S. Pfizer - looks to be a cash cow and is likely to add 40 billion won to revenue every year.

Due to its heavy R&D spending in recent years, its stock remains undervalued compared to its rivals, said the brokerage as it projected its stock price to head upward once projects start to generate money. Currently, CKD is trading on a 2018 price-earnings ratio (P/E ratio) of 19.7x, significantly low compared to its rivals - Hanmi Pharmaceutical Co. (89.5x), Daewoong Pharmaceutical Co. (54.3x), Green Cross Corp. (35.9x), and Yuhan Corp. (23.1).

Hanyang Securities maintained its ‘buy’ recommendation with a target price of 155,000 won. CKD shares closed Tuesday at 98,300 won, down 2.67 percent from the previous trading session.

For more information, please contact Lim Dong-lock, analyst at Hanyang Securities, by phone at 82-2-3770-5428 or email at limrotc37@hygood.co.kr.

You can also visit Financial Supervisory Service (http://englishdart.fss.or.kr/) for company details and latest quarterly report (search code: Chong Kun Dang Pharmaceutical or 185750). For latest trading data, please visit Korea Exchange (http://englishdart.fss.or.kr/) and search under Chong Kun Dang Pharmaceutical or 185750.

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