20171115-三星证券-Domestic_sales_solid,_COGS_ratio_improving_7页_1mb

Daewon Pharmaceutical (003220) Summary

Core Content

Daewon Pharmaceutical (003220) has reported strong performance in its 3Q results, with consistent growth in prescription drug sales and improvements in cost management. The company's financials show resilience in a challenging market environment, and its stock is currently trading at KRW19,550 with a target price of KRW23,000, indicating a potential 17.6% increase. The analyst maintains a BUY rating, citing continued outperformance in prescription sales and a declining COGS-to-sales ratio.

Key Points

3Q Performance

• Sales: KRW65.2b, up 18.0% y-y and 1.0% q-q.
• Operating Profit: KRW8.7b, up 4.1% y-y and 15.5% q-q.
• Net Profit: KRW8.6b, up 23.8% y-y.
• Operating Margin: 13.4%, down 1.8% pts y-y.
• COGS-to-sales ratio: 40%, down 1.2% pts q-q.
• SG&A costs-to-sales ratio: 46.6%, up y-y but slightly lower than 1H figures.

Sales Breakdown

• Domestic Sales: Up 21.2% y-y to KRW53.2b.
• CMO Sales: Up 11.5% y-y to KRW10.6b.
• Exports: Down 25.9% y-y to KRW1b.
• Other Sales: Down 22.7% y-y to KRW0.4b.

Key Product Growth

• Codaewon Forte Syrup: Up 26.9% y-y to KRW2.89b.
• Pelubi/Pelubi CR: Up 38.3% y-y to KRW3.62b, driven by aggressive marketing and the addition of fever as an indication in September.

Cost Control

• The company has made progress in reducing the COGS-to-sales ratio, likely due to more products generating annual sales of over KRW10b.
• SG&A costs increased y-y, primarily due to higher advertising, sales commissions, and commissions paid, but remained slightly lower than 1H figures, indicating efforts to control expenses.

Financial Highlights

Valuation

• Current Price: KRW19,550
• Target Price: KRW23,000 (17.6% upside)
• Market Cap: KRW355.87b / USD318.28m
• Shares (float): 18,203,175 (59.4%)
• 52-week High/Low: KRW23,350 / KRW17,147
• Avg Daily Trading Value (60-day): KRW1.2b / USD1.1m

Forward P/E

• Based on a 15x forward P/E (five-year average), the target price remains unchanged.

Forecast Changes

Financial Ratios

EPS and Dividend Trends

Investment Rating

• BUY: Expected to increase in value by 10% or more within 12 months and is highly attractive within the sector.
• HOLD: Expected to increase/decrease in value by less than 10% within 12 months.
• SELL: Expected to decrease in value by 10% or more within 12 months.

Analyst Information

• Analyst: SunYoung Yoon
• Email: sy85.yoon@samsung.com
• Date: 2017.11.15

Compliance Notice

• The analyst did not hold any shares or convertible debt instruments of the company as of Nov 14, 2017.
• Samsung Securities' holdings of shares and convertible debt instruments would not exceed 1% of each company's outstanding shares if converted.
• The report is not intended as investment advice and must not be altered, reproduced, distributed, or transmitted without permission.
• Information is based on publicly available data and may not be suitable for all investors.

Summary of Key Changes

One-Year Performance

Analyst Ratings

• BUY: 5
• HOLD: 3
• SELL: 2
• BUY★★★: 1

Conclusion

Daewon Pharmaceutical continues to show strong domestic prescription sales growth, with a notable 15.9% y-y increase in 3Q. The company's cost management efforts have led to a declining COGS-to-sales ratio, which is a positive sign for future profitability. Despite an increase in SG&A costs, the firm is maintaining control over expenses. The analyst's recommendation remains BUY, supported by the company's outperformance in prescription sales and improved cost structure. The target price of KRW23,000 is based on a 15x forward P/E, and the stock is currently undervalued relative to this metric. The company's financial ratios indicate a healthy position, with increasing profitability and improving margins.