[Click eStock] "Chong Kun Dang to Deliver 2Q Results Meeting Expectations... Investment Rating Upgraded to 'Buy'"

[Asia Economy Reporter Myunghwan Lee] Kiwoom Securities announced on the 18th that it has upgraded its investment opinion on Chong Kun Dang from neutral to buy. This is because the company is expected to deliver results in line with market forecasts for the second quarter of this year. The target price was maintained at 110,000 KRW.

Kiwoom Securities projected Chong Kun Dang's sales for the second quarter of this year to be 356 billion KRW, a 9% increase compared to the same period last year, and operating profit to be 27.6 billion KRW, an 18% decrease. The operating profit margin was forecasted at 8%. These figures align with the market estimates of 352.1 billion KRW in sales and 27.3 billion KRW in operating profit.

Profitability is expected to temporarily decline compared to the same period last year. This is due to the accumulation of related provisions as sales of flu treatments decreased following improvements in hygiene culture caused by COVID-19. However, steady growth of key products such as Prolia and K-CAB is expected to continue. In particular, the recovery in sales of Lipiro, which had received administrative sanctions last year, was noted as a positive factor.

Kiwoom Securities forecasted Chong Kun Dang's annual sales for this year to increase by 8% year-on-year to 1.436 trillion KRW, and operating profit to increase by 4% to 97.6 billion KRW. With three pipelines entering global Phase 2 clinical trials in 2023, research and development expenses are expected to rise. However, R&D costs are viewed as investments for the future, with data releases and technology transfers for related pipelines anticipated in 2024-25. Due to the suspension of Phase 3 clinical trials for the COVID-19 treatment 'Napabeltan' this year, R&D expenses are expected to increase by only 4% year-on-year to 169.5 billion KRW.

Hye-min Heo, a researcher at Kiwoom Securities, analyzed, "Since the R&D momentum is not significant this year, the focus should be on whether earnings improve rather than waiting for short-term R&D momentum," adding, "From 2023, three pipeline substances will enter global Phase 2 trials, raising expectations for future R&D outcomes."

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