20170824-三星证券-One_step_closer_to_becoming_a_global_player_11页_463kb

Hugel (145020) Summary

Core Content

Hugel, a South Korean medical aesthetics company, is positioned for global expansion with the support of Bain Capital, which has acquired the German generics firm Stada. This acquisition is expected to significantly enhance Hugel's European distribution capabilities, particularly with the upcoming release of botulinum toxin (BTX) and filler products in the region. Additionally, Hugel is planning to expand its presence in the US by partnering with a major player, leveraging Bain's global network. The company is currently trading at KRW522,300, with a target price of KRW730,000, and is considered a top pick by the analyst.

Key Points

• Market Position: Hugel is a key player in the medical aesthetics sector, focusing on BTX and filler products.
• Bain Capital Acquisition: Bain Capital has acquired Stada, a leading German pharmaceutical firm, which will provide strong synergies for Hugel in Europe.
• Global Expansion: Hugel plans to enter the US and European markets, which together make up 76% of the global BTX market.
• Export Performance: Korea's BTX exports showed strong growth in August 2017, with a 24% increase compared to the same period in 2016. Despite July being a weak season, export data for August suggests continued momentum.
• Market Share in China: Despite concerns about the THAAD dispute, Korean firms including Hugel maintained or increased their market share in China's filler market in 1H2017.
• Financial Outlook:
  • Revenue: Expected to grow from KRW124b in 2016 to KRW288b in 2019.
  • EPS Growth: Projected to increase from KRW13,177 in 2016 to KRW27,942 in 2019.
  • Profit Margins: EBITDA margin is expected to remain stable at around 60.9%, while the P/E ratio is projected to decline from 24.4 to 18.7.
• Company Valuation: Based on Bain's acquisition price, Hugel's per-share value is estimated at KRW450,561, with the current price at KRW522,300, showing a 15.9% increase.
• Share Structure: The company has a float of 4,269,275 shares, with a market cap of KRW2.2 trillion or USD1.9 billion.
• Risks: Hugel and Medytox are still awaiting approval from China's Food and Drug Administration (CFDA) for their products, which could affect their market entry in China.

Key Information

• Target Price: KRW730,000 (39.8% upside from current price).
• Current Price: KRW522,300.
• Market Cap: KRW2.2t/USD1.9b.
• Shares (float): 4,269,275 (51.0%).
• 52-Week High/Low: KRW617,900/KRW259,000.
• Avg Daily Trading Value: KRW19.6b/USD17.3m.
• One-Year Performance:
  • Hugel: -15.2% (1M), 43.0% (6M), 19.1% (12M).
  • Vs KosDAQ: -10.9% (1M), 37.2% (6M), 27.2% (12M).

Key Changes

• Recommendation: Remains BUY.
• Target Price: Unchanged at KRW730,000.
• 2017E EPS: Increased slightly to KRW19,171 from KRW19,132 (0.2%).
• 2018E EPS: Decreased by 0.8% to KRW22,463 from KRW22,636.

Key Partnerships and Market Entries

• China: Hugel is partnered with Sihuan Pharmaceutical, and the firm is expected to enter the Chinese BTX and filler markets in 2H18 and 2H19, respectively.
• Stada: Provides distribution rights across Europe, and Hugel is expected to benefit from the merger of Stada with Sanofi's European generics unit.

Analyst's Recommendation

• The recent pullback in Hugel's shares due to concerns over 3Q results is considered excessive. The stock remains a top pick, and the analyst recommends using this pullback as an opportunity to accumulate shares.
• The forward P/E is at 26.3x, which is lower than the 32.7x of domestic rivals, indicating potential undervaluation.

Financial Data Summary

Export Data and Market Share

• Korea's BTX Exports (USDm):
  • Aug 1-20, 2017: 5.94 (up 24% from 2016).
  • 3Q 2017: Expected to remain flat at USD27.89m.
• China's Filler Market Share: Combined share of Korean firms increased in 1H2017.
• Hugel's Filler Sales: Expected to rise by 18.5% y-y to KRW29b in 2H2017.

Conclusion

Hugel is well-positioned for global expansion, particularly in the US and Europe, supported by Bain Capital's strategic acquisitions and partnerships. Despite some short-term volatility, the firm's long-term prospects are positive, with strong export data and a growing market share in key regions. The analyst recommends buying the stock during the recent pullback, citing strong fundamentals and growth potential.