[Click eStock] Hugel, 1Q Earnings Expected to Decline... Target Price Down

Daol Investment & Securities analyzed on the 19th that Hugel's first-quarter performance is expected to be weaker than anticipated. The investment opinion 'Buy' is maintained, but the target price was lowered to 150,000 KRW.

Jonghyun Park, a researcher at Daol Investment & Securities, stated, "First-quarter sales are expected to be 71 billion KRW, down 17% from the previous quarter, and operating profit is expected to decrease by 26% to 22.2 billion KRW, falling short of consensus." This is because shipments to China have not proceeded, leading to weak toxin sales in Asia.

Sales are expected to increase depending on the local inventory levels of Sahwan Pharmaceutical. Researcher Park evaluated, "Toxin sales are expected to increase by 24% year-on-year to 39 billion KRW, thanks to growth in Europe (4 billion KRW) and South America (4.6 billion KRW)." However, the operating profit margin is expected to decrease by 8 percentage points compared to the previous year, due to increased ITC litigation costs (4.5 billion KRW).

This year, sales are projected to increase by 18% year-on-year to 333.4 billion KRW, and operating profit is expected to rise by 3% to 104.4 billion KRW. The key factor is the recovery of sales to Sahwan Pharmaceutical following China's reopening.

Researcher Park said, "Although shipments to China were not recorded in the first quarter, sales recovery in China is expected depending on Sahwan Pharmaceutical's local inventory levels," and added, "Sales to China are expected to increase by 30% year-on-year to 33.8 billion KRW."

In the case of Letibo, benefits are expected from the resumption of China's reopening. Letibo is the fourth toxin product approved in China. Companies planning to enter the Chinese market include Daewoong Pharmaceutical (product approval application), Medytox (product approval application), and Revance (currently in Phase 3 clinical trials in China). In Europe, sales are projected to increase by 163% year-on-year to 20.4 billion KRW due to additional product approvals in 16 countries within the year.

Meanwhile, Hugel's stock price declined due to increased concerns over toxin business risks amid ongoing litigation with Medytox and ITC following the civil first trial result of Daewoong Pharmaceutical in February. Researcher Park stated, "The US ITC litigation result is expected to be delayed beyond the preliminary ruling in January 2024," and added, "As the appropriate price-to-earnings ratio (PER) was lowered from 30 times to 25 times, the fair target price was also reduced."

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