[Click eStock] SK Chemicals Soars with COVID-19 Vaccine Contract Manufacturing

First CMO Contract Signed with UK AstraZeneca for COVID-19 Vaccine
Expectations for Additional Contracts... Positive Outlook for Copolyester Sector as Well

[Asia Economy Reporter Minwoo Lee] SK Chemicals is expected to achieve second-quarter results exceeding expectations as it signed a contract with British pharmaceutical company AstraZeneca for the contract manufacturing of the novel coronavirus (COVID-19) vaccine, along with generating sales related to COVID-19 prevention.

On the 22nd, NH Investment & Securities maintained a 'Buy' rating on SK Chemicals and raised the target price from 100,000 KRW to 260,000 KRW. The closing price the previous day was 178,500 KRW. Researcher Koo Wan-sun of NH Investment & Securities explained, "SK Chemicals signed a global pharmaceutical contract manufacturing organization (CMO) agreement for AZD1222 with AstraZeneca, which is leading the COVID-19 vaccine development race, and the value of the next-generation pneumococcal vaccine jointly developed with Sanofi has also increased. As a result, strong second-quarter performance is expected."

Based on this background, NH Investment & Securities forecasted that SK Chemicals would record sales of 292.8 billion KRW and an operating profit of 25.7 billion KRW in the second quarter of this year. Although these figures represent decreases of 23.0% and 15.7% respectively compared to the same period last year, they significantly exceed market consensus estimates of 269.2 billion KRW in sales and 17.8 billion KRW in operating profit.

The CMO contract with AstraZeneca is considered particularly effective. Currently, more than 100 COVID-19 vaccines are being developed worldwide, and among them, the fastest to market by the end of this year or early next year are products from American pharmaceutical company Moderna and AstraZeneca. Since SK Chemicals has already secured the first vaccine CMO contract with AstraZeneca, additional contracts are also anticipated.

Researcher Koo stated, "SK Chemicals has been investing in the vaccine business for about 10 years, but the Andong plant, with a total production capacity of 150 million doses, had an operating rate below 10% since its completion in 2014. However, due to the surge in global vaccine CMO demand amid the COVID-19 situation, the operating rate of the company's vaccine plant is expected to rise rapidly."

The valuation of the next-generation pneumococcal vaccine, jointly developed with Sanofi in the global Phase 2 clinical stage, has also increased. Researcher Koo explained, "Judging that the previous valuation of 359.8 billion KRW was overly conservative, we revised the probability of development success from 30% to 50%, resulting in a valuation of 599.7 billion KRW."

Additionally, positive outlooks have emerged for the demand of 'copolyester,' a plastic raw material used in large supermarkets, taxis, and podiums. As SK Chemicals is one of the two major global suppliers, the operating profit contribution from the copolyester sector is expected to reach 20 billion KRW due to new COVID-19 prevention demand. Researcher Koo said, "The favorable spread environment for copolyester and the easing of demand in China will sustain an upward trend in performance for the time being." Estimated sales are 100.1 billion KRW (-10.9% y-y).

This content was produced with the assistance of AI translation services.