[Click e-Stock] "Green Cross, Lowered Expectations for CMO... Target Price Down"

[Asia Economy, Reporter Song Hwajeong] Daishin Securities lowered its target price for Green Cross (GC) from 440,000 won to 300,000 won on December 10, reflecting uncertainties surrounding its contract manufacturing organization (CMO) agreements. The investment rating was maintained at 'Buy'.

Im Yoonjin, a researcher at Daishin Securities, explained, "We reduced our target price by 32% compared to the previous figure, due to adjustments in business value stemming from CMO contract uncertainties, a downward revision in the fourth-quarter consolidated operating profit estimate following the cancellation of diagnostic kit supply contracts by subsidiary GCMS, and a change in target valuation (EV/EBITDA) from 20x to 17x compared to the average enterprise value of leading pharmaceutical companies."

Since August 28, Green Cross has announced three times that it was in discussions with Janssen regarding a CMO agreement for finished COVID-19 vaccine products (DP). However, it disclosed the previous day that these discussions had been discontinued. Im stated, "Although the specific reasons were not disclosed, it is estimated that Janssen's poor vaccine sales performance influenced this decision." He added, "The signing of the main CEPI vaccine CMO contract by Green Cross is also being delayed more than expected, so we excluded the CMO business value (863.3 billion won) due to contract uncertainty." He continued, "However, considering the global imbalance in COVID-19 vaccine supply and Green Cross's production capacity, it is possible that the business value could be reflected again depending on the timing and volume of future CMO contracts."

He also expressed the view that robust fourth-quarter earnings growth and expectations for the approval of the blood product 'IVIG-SN' 10% next year remain valid. Daishin Securities estimated Green Cross's consolidated sales for the fourth quarter at 490.2 billion won, an 18% increase year-on-year, with operating profit turning positive at 20.5 billion won. Im noted, "Continued domestic demand for flu vaccines is expected to result in related sales of 27.4 billion won, and Moderna COVID-19 vaccine distribution sales of 54.3 billion won, supporting solid earnings growth." He further stated, "The new drug approval review for IVIG-SN 10% is underway, and it has been confirmed that the FDA's plant inspection was completed in November. If approval is obtained in February next year, the product could be launched in the US as early as the second half of next year."

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