[Click eStock] "SK바사, COVID-19 Vaccine Optimism Dims Amid Reopening... Target Price ↓"

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[Asia Economy Reporter Myunghwan Lee] Shinhan Financial Investment announced on the 16th that it is lowering the target price of SK Bioscience from the previous 180,000 KRW to 121,000 KRW. The reason is that expectations for the company's COVID-19 vaccine 'Skycovione (GBP510)' are declining amid the reopening of economic activities. However, the investment opinion remains a buy.

Shinhan Financial Investment estimates SK Bioscience's sales for the second quarter of this year to be 140.4 billion KRW, down 2.9% year-on-year, and operating profit to be 64.3 billion KRW, down 2.8%. The operating profit margin is estimated at 45.8%. This is evaluated as performance in line with market expectations.

Compared to the previous quarter, sales are expected to increase by 61% and operating profit by 171%. This is attributed to the resolution of the quality assurance (QA) delay issue in the contract development and manufacturing organization (CDMO) for the Novavax COVID-19 vaccine, which had continued until the first quarter of this year, starting from April. It also pointed out that stable growth in CDMO sales is expected in the second half of the year.

The COVID-19 vaccine Skycovione, developed by the company, is expected to obtain domestic approval in June and, if possible, World Health Organization (WHO) approval in the third quarter. Accordingly, Shinhan Financial Investment expects that sales from the 200 billion KRW advance purchase contract with the Korea Disease Control and Prevention Agency and supply sales to the COVAX facility will gradually increase starting from the third quarter.

However, the expected sales of Skycovione are forecasted to decrease due to the reopening effect. This is because of the high stockpiles of COVID-19 vaccines in various countries worldwide and the sharply reduced additional vaccination rates at the time when global reopening is in full swing. In South Korea, the first and second dose vaccination rates for COVID-19 vaccines recorded 87.4% and 86.5%, respectively, but the rate sharply dropped to 64.6% from the third dose and was only 8.3% for the fourth dose. Previously, the estimated vaccine sales of major companies that launched COVID-19 vaccines also showed a sharp decline from 63.1 billion USD (approximately 80.1 trillion KRW) this year to 33.6 billion USD (approximately 43.4 trillion KRW) next year, and then to 20.1 billion USD (approximately 25.7 trillion KRW) in 2024.

Researcher Donggeon Lee of Shinhan Financial Investment diagnosed, "For a stock price rebound, it is necessary to visualize high growth in vaccine sales or concrete achievements regarding future expansions and entry into new businesses."

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