[Click eStock] "Samsung Biologics, Investment Results Expected to Materialize This Year"

Increase in Labor Costs Reduces Operating Profit Margin but Only Temporarily
Fourth Plant to Operate in Second Half of This Year... Sufficient Growth Momentum from Expansion

[Asia Economy Reporter Minwoo Lee] Samsung Biologics is expected to see its operating profit margin decrease by about 4.3 percentage points (P) in the fourth quarter of last year due to increased labor costs. However, since this is a temporary cost increase and growth momentum from proactive investments starting this year is becoming concrete, it is analyzed that performance growth will begin in earnest.

On the 12th, Shinhan Financial Investment maintained its "Buy" rating and target price of 1.2 million KRW for Samsung Biologics based on this background. The closing price the previous day was 833,000 KRW.

The fourth quarter results last year are forecasted at consolidated sales of 438.2 billion KRW and operating profit of 143.9 billion KRW. This represents increases of 16.8% and 55.4%, respectively, compared to the same period last year, aligning with market consensus. The plant utilization rates reflected in the fourth quarter results for the third quarter were at maximum levels for Plants 1 and 2, and nearly maximum for Plant 3. Compared to the second quarter plant utilization rates, Plant 3’s utilization rate is judged to have slightly declined.

The operating profit margin is expected to improve by 8.1 percentage points compared to the same period last year. However, labor costs are expected to increase significantly compared to the previous quarter due to preparations for Plant 4 operation in the fourth quarter, expanded hiring related to new business ventures such as messenger ribonucleic acid (mRNA) drug substance (DS) business, and special incentives for Samsung Group employees (up to 200% of the bonus base). Based on this, the estimated selling and administrative expenses for the fourth quarter are 58.5 billion KRW. This is the reason the operating profit margin is expected to fall by 4.3 percentage points compared to the third quarter. However, since this is a one-time factor, the operating profit margin is expected to rise again from the first quarter of this year.

This year’s performance is estimated at consolidated sales of 1.8241 trillion KRW and operating profit of 661.1 billion KRW, representing increases of 16.8% and 19.7%, respectively, compared to the same period last year. Although regular maintenance will be conducted at Plant 2, maximum utilization rates are expected to be maintained at Plants 1 and 3. Additionally, Plant 4 is scheduled to begin partial operation in the second half of this year. Since the planned expansion of finished pharmaceutical (DP) production and acquisition of mRNA DS facilities scheduled for the first half of this year are not included in the sales estimates, there is ample room for further upward revision of performance.

Donggeon Lee, senior researcher at Shinhan Financial Investment, explained, "This year, growth momentum from proactive investments will become concrete," adding, "It is necessary to pay attention to the growth momentum to be announced at the JP Morgan Healthcare Conference on the 12th (local time)."

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