2Q13 review: OP outperforms, earnings passing through trough - KITC - 2013 年 7 月 30 日
Green Cross posted 2Q12 sales of W206.4bn (1.6% YoY) and OP of W17.1bn (8.6% YoY). OP exceeded our preview estimate (July 18) by 3.4% and the consensus by 13.8%. Top-line growth was slow, but OP outperformed, as we had expected. Strong vaccine exports and Hunterase (Hunter syndrome bio-better treatment), which are relatively high-margin, offset margin pressure from stagnant sales growth and the R&D cost burden.
After contracting in 1Q13, OP growth resumed. Concerns over OP had been substantial due to a higher fixed cost burden after stagnant sales and consultation fees related to the acquisition of Plasma Resources UK (PRUK, UK-based plasma derivatives specialist). However, OP beat expectations as R&D costs (W16.3bn, 7.9% to total sales) was smaller than expected.
Long-term overseas momentum to offset weak short-term earnings - KITC - 2013 年 2 月 4 日
4Q12 earning: Operating loss W6bn
4Q12 sales were flat YoY at W194.1bn, but Green Cross turned to an operating
loss (W6bn). While poor OP was expected, actual earnings missed the consensus
(W12bn in Dec, lowered to BEP recently) sharply due to heavy R&D costs
(W29bn; 1Q-3Q12 average W14bn). Green Cross also disappointed on larger-
than-expected refund losses (estimated W5bn) on flu vaccine oversupplies. While
most businesses were slow, the vaccine business posted a 22% YoY sales growth
on merchandise products from global pharmas (Novartis and MSD).
2013 outlook: Turnaround likely, buy margin expansion to be limited on R&D
We forecast 2013 sales of W888.6bn (up 9.5% YoY) and OP of W88.3bn (up
18.7% YoY). We expect an OP turnaround on low base effect, a rising contribution
of high-margin exports (flu vaccine, albumin, plant exports to Thailand) and
economies of scale. However, margin expansion should be limited as negatives
that dragged on 2012 earnings (slowing domestic plasma derivatives growth, R&D
spending) should continue into 2013. We anticipate meaningful OP margin rise
from 2015 as two plasma derivatives (US) and bio-better treatment for Hunter
Syndrome are scheduled to launch commercially.
Overseas expansion should stilly catalyze long-term re-rating
Green Cross still has the most visible overseas market momentum (plasma
derivatives, orphan drugs, China) among Korean top tiers, despite the poor short-
term earnings. And given that interest in the pharma business has been fueled by
expectations for overseas markets, we believe Green Cross remains attractive. Of
note, Green Cross is targeting favorable markets in terms of marketability and
profitability as high entry barriers limit competition. Green Cross has secured
global top 10 capacity and technology for its target markets.
Maintain BUY on strong pharma sentiment and overseas expansion
We slashed our 2012 OP estimate by 26.8% and 2013 by 38% to reflect the 4Q12
earnings shock and sustained R&D burden. As such, we lowered our TP from
W191,000 to W175,000 (DCF, 2013 intrinsic PE 29x, mid-cycle average of global
plasma derivatives makers 26x PE). Our TP change was limited, as: 1) margins
should surge from 2015 on new drug launches, and 2) equity stakes value in
Ildong Pharm and Innocell (W155.8bn) have jumped fivefold. We maintain BUY as
share price should rebound on sector leading margins and overseas momentum,
after pulling back due to the poor 4Q12 results.
4Q11 review: Disappointments already reflect, hopes lie in exports - KITC Full Report - PDF - 2012 年 2 月 16 日
Green Cross posted 4Q11 sales of W192bn (+25% YoY) and OP of W10.8bn (+1,700% YoY). However, OP missed our estimate by 28% on disappointing high-margin flu vaccine sales (W6bn below estimate) and one-off costs.
Green Cross posted outstanding results compared to competitors as total sales improved 25% YoY and sales, excluding new licensed-in products (W20bn), increased 12% YoY. In particular, exports fueled the top-line growth, expanding 37% YoY (16% to total sales). Exports should surge further in 2012 (84.7% YoY, adding W69bn in sales).
OP growth was less than 10%, stripping out one-off factors, as R&D cost rose (+33% YoY) on overseas clinical trials and as the OP contribution of new licensed-in products is low compared to the sales contribution. The R&D cost burden should grow (maximum 10% of total sales, +2%p YoY) on numerous overseas clinical trials.
We lower our TP from W215,000 to W191,000 (DCF method, 2012F intrinsic PE 25x, in line with eight-year historical high and mid-cycle PE of global plasma derivatives makers) as we revise down our 2012F OP estimate by 26.6% and reflect: 1) slower-than-expected COGS-to-sales ratio reduction in plasma derivatives, 2) higher R&D costs, and 3) lower-than-expected flu vaccine export volume in 2012.
3Q11 review: OP surprise, strength to continue in4Q11 - KITC Full Report - PDF - 2011 年 11 月 7 日
Attractive during economic downturn given biotech
business, earnings and overseas momentum - KITC Full Report - PDF - 2011 年 9 月 28 日
As economic uncertainty persists, Green Cross continues to post solid earnings and generate broad overseas momentum, which we believe will catalyze a share re-rating in 2H11. Furthermore, Green Cross is a biotech player (plasma derivatives, vaccines), and this should bolster its growth outlook. Of note, investors are growing increasingly interested in biotech plays. As such, we maintain BUY with a target of W215,000, equivalent to a 2012F PER of 21x (versus global plasma derivative makers mid-cycle average of 26x). Furthermore, we maintain Green Cross as our top pharmaceutical pick.
More pros to utter about plasma derivatives - KITC Full Report - PDF - 2011 年 6 月 23 日
Blood derivatives to fuel re-rating - KITC Full Report - PDF - 2011 年 6 月 7 日
Refer to Report for Details.
Overseas expansion set to take off: WHO flu vaccinePQ approval achieved - KITC Full Report - PDF - 2011 年 4 月 15 日
Focus on Green Cross amid pharmaceutical shares bouncing back - KITC Full Report - PDF - 2011 年 4 月 4 日
3Q10 review: Outstanding earnings amid pharma's sluggish performance - KITC Full Report - PDF - 2010 年 10 月 27 日
Green Cross delivered an earnings surprise, with figures surpassing the KIS
estimates and consensus by13-19%, despite top-tiers' sluggish earnings in
3Q. The 3Q10 sales and operating profit jumped 20.7% YoY (W192bn) and
65.4% YoY (W34.4bn) respectively.
Thanks to better COGS-to-sales coming from in-house production of flu
vaccine, the company improved its operating profit margin by 2%p compared
to the three-year average. The operating margin of 15.4% among all divisions
excluding H1N1 in 2010F is a high-point for the pharmaceutical sector. We
believe the margin improvement will stay in place thanks to a variety of factors
in the future.
Although short-term momentum will slip due to the PQ delay, we maintain
BUY for the long-term based on: 1) outstanding top-line earnings compared to
peers, 2) profitability improvement owing to in-house production of flu vaccine
materials, and 3) a solid vaccine growth story in the mid-long term. We
maintain the price target of W205,000 using DCF method , which equals a
2010F PER of 14.7x and 2011F PER of 18.4x.
Take a breather due to PQ delay but still very good - KITC Full Report - PDF - 2010 年 9 月 20 日
Liberated despite anti-rebate measures in 2Q - KITC Full Report - PDF - 2010 年 7 月 30 日
We maintain BUY and the price target of W205,000 reflecting 1) mid to long-term growth spurred by the vaccines business, 2) attractive valuation, and 3) relatively few regulatory risks. - KITC - 2010 年 6 月 7 日
2Q10 preview: sales should jump 15.4% YoY to W162.5bn and operating profit should surge 40.5% YoY to W28.4bn.
Other investment merits include extensive vaccine pipeline, brisk vaccine exports, and more-lucrative blood derivatives business.
3Q09 review. - KITC - 2009 年 10 月 30 日
The 3Q revenue and operating profit reached W162bn and W20.8bn, up 13% and 3% YoY, respectively.
We expect 4Q sales and operating profit to increase 61% and 120% YoY on the back of H1N1 virus sales.
We maintain BUY with a target price of W205,000.
Limited negatives from CB, BW issue - KITC Full Report - PDF - 2009 年 10 月 16 日
Green Cross announced on Oct 16 the issue of CB (W30bn) and BW (W30bn) with three-year maturity. The coupon rate is 0% for the CB and BW and the yields-to-maturity are 3% and 1.75%, respectively. The bonds may be exercised starting Oct 20, 2010 to Oct 16, 2012. Green Cross plans to pay down short-term debt of W60bn from the new funding. With its current cash on hand, the company has spending plans for an R&D center (W35bn) and poultry farm to build a stable fertilized egg supply.
Limited EPS dilution effect
Given the strike price (W153,380) is not high compared to the current share price, creditors will likely exercise their rights. Assuming the total issued amount will be exercised in late-2010, we will see 4.4% share dilution. However, considering the 5.3%p interest rate savings, which is the difference between the current short-term debt average interest and coupon rates, the 2010F EPS dilution effect is only 3.1%. Therefore, we must focus on the positive aspects such as: 1) stable capex funding for future growth, and 2) improved financing costs rather than on the negative effects of: 1) EPS dilution, and 2) opportunity cost.
Expect solid 3Q09 - Solid vaccine and export sales. - KITC - 2009 年 10 月 15 日
We expect the 3Q09 sales to increase 15.1% YoY to W162bn on the back of stable growth at all divisions and product launches. Vaccine revenue is set to increase more than 40% YoY due to new sales contribution from in-house produced flu vaccine raw materials and ASP increase (60% YoY). Operating profit should climb 15.2% YoY as the high-margin vaccines and export sales portion is growing.
We expect additional revenue from high ASP overseas vaccine exports given the likely imbalance in global vaccine supply for the next four to five months.
We highlight a further re-rating of the stock on the back of solid mid to longterm fundamentals such as: 1) numerous vaccine growth drivers (2008- 2011F, 34.7% CAGR), and 2) relatively less regulatory risks than peers. We maintain BUY with a 12-month price target of W205,000.
Increasingly favorable situation. - KITC - 2009 年 8 月 28 日
We raised the 12-month price target from W165,000 to W205,000 by
applying the five-year high PER of 24x (previously 18.5x) the 12-monthforward
EPS as: 1) the new influenza issue will continue to be an upswing
factor throughout 2H, and 2) the firm will likely provide more vaccines to the
government than the planned 12mn doses due to the difficulty of acquiring
vaccines abroad. We also considered the robust mid and long-term growth of
the vaccine business (2008-2011F CAGR of 34.7%).
We expect sales of W96bn from the 12mn doses (50% of government's
inventory target) of H1N1 vaccine to the government. But sales may exceed
our forecast since the counter's supply to the government will likely rise given
the hardship of acquiring vaccines overseas.
We predict the 2010F sales and operating profit to climb 13.3% and 22.6%,
respectively, from the previous estimates, should Green Cross meet all the
vaccine needs of the government (24mn doses for W8,000 each).
Mid, long-term fundamentals both solid. - KITC Full Report - PDF - 2009 年 8 月 18 日
Reinstate coverage with BUY and price target of W165,000.
Vaccines, mid and long-term growth driver to bolster 2010 sales.
Further H1N1 momentum depending on spread and supply imbalance.
Closing price: W86,000 (+1.18%). - KITC Full Report - PDF - 2009 年 2 月 2 日
The stock ended up 1.2% at W86,000.
4Q08 earnings posted modest top-line but weakened bottom-line due to the
start-up of a new plant and changed sales structure.
The vaccine business should provide mid- to long-term growth potential.
Closing price: W85,900 (+0.70%). - KITC Full Report - PDF - 2009 年 1 月 19 日
The stock gained 0.7% to end at W85,900.
4Q08 earnings preview: Modest profitability with efficient control of
Cost burden should become heavier with its increased sales of lowmargin
products and operation of new plant but the counter should
be able to absorb any increase for the most part.
3Q08 review: Slightly weaker than expected
12-month forward PER of 14.7x, PBR of 2.5x and EPS growth of 8.3% - KITC Full Report - PDF - 2008 年 10 月 30 日
3Q08 earnings review: Sluggish flu vaccine sales caused earnings to miss
Sales soared 13.8% YoY to W140.7bn and operating profit climbed 4.6% YoY to
W20.3bn. The figures fell slightly shy of both the KIS (sales of W145.4bn and
operating profit of W22bn) and the market's expectations (sales of W144.1bn and
operating profit of W22.2bn). We view sluggish vaccine sales as the culprit behind
the weaker-than-expected earnings. At the government's vaccine bidding, Green
Cross failed to defeat Korea Vaccine's aggressive low price strategy and most
vaccine demand, which should have arisen during 3Q, was deferred to October
with the prolonged summer, leading to poor flu vaccine sales.
The operating margin dropped to 14.4% from 15.7% in 3Q07 as the COGS-to-sales
ratio gained 3%p YoY to 61.5% from 58.5% in 3Q07 due to 1) the introduction of
licensed drugs such as Cervarex (cervical cancer) and Rotarix (rotavirus), 2)
greater sales of low-margin albumin and 3) sharp KRW depreciation. On the nonoperatingside, earnings before tax plunged 44.4% YoY. During 3Q, interest
expenses of W2bn, production loss of W2bn and FX-related loss of W1bn were
recognized as non-operating expenses and there were no one-off gains as in 3Q07.
In 3Q07, Green Cross enjoyed gains on the disposal of its stake in Kyungnam
Closing price: W93,700 (-0.32%). - KITC Full Report - PDF - 2008 年 7 月 31 日
The stock ended down 0.32% at W93,700.
We expect robust 3Q07 earnings momentum on seasonal products
and recovering albumin sales.
We also find it positive that the counter's sales structure makes it
less vulnerable to regulatory risks.
Closing price: 87,200 (-0.46%). - KITC Full Report - PDF - 2008 年 5 月 22 日
The stock closed down 0.46% at W87,200.
Profitability should improve thanks to greater albumin sales and
diversified blood plasma import sources. The COGS-to-sales ratio will
We expect earnings momentum to begin in 2Q08 as albumin sales
recovered following a stagnant period and some products should
benefit from seasonally strong demand.
Closing price: W79,800 (+2.18%). - KITC Full Report - PDF - 2008 年 5 月 2 日
Profitability rose as the albumin sales recovered after a stagnant
period and the COGS ratio declined thanks to more diversified blood
plasma import channels.
The company is less vulnerable to regulatory risks as its business is
focused on special pharmaceuticals such as blood products and
Little worries. - KITC Full Report - PDF - 2008 年 3 月 14 日
- We maintain Long-term BUY with a six-month price target of W110,000
As Korea's blood supply shortage worsened, worries surfaced that Green Cross Corp.,
whose major product is serum albumin (blood derivative), would witness its COGS-tosales
ratio rise. However, we believe its profitability will remain intact as: 1) the albumin
price may be increased or plasma import sources may become more diverse amid the
heightening public awareness of the albumin supply shortage, 2) the terms for flu vaccine
imports (bulk) changed in the counter's favor in 2008, and 3) high-margin placenta-based
drugs continue to show solid sales.
- Public awareness of albumin shortage suggests favorable operating environment
As albumin is in severe short supply, the issue is gaining widespread public attention.
The current blood supply shortage has occurred as the number of donors has fallen
sharply. With fewer donations, now only 65% of plasma demand is met domestically. To
make matters worse, as a safety issue makes the import process stricter, the only
present permitted source is the US. We are now in a situation where the only way to
import the twice more expensive US plasma is to raise product prices. But even that is
not easy since the government-controlled pricing system makes it hard to raise product
prices despite higher raw material costs. It appears the government must either allow
albumin prices to rise or permit imports from cheaper Europe or Australia.
- Albumin is the most abundant plasma protein in humans. As albumin is a necessity for
critical or emergency surgery, the supply shortage is a serious problem. We do not think
the government will just sit and watch the current situation. Forthcoming measures are
likely in order to improve the situation. If import sources are diversified or albumin prices
are raised to make pricey imports more feasible, Green Cross will likely witness its sales
grow and COGS-to-sales ratio fall.
- More favorable terms for flu vaccine imports
GlaxoSmithKline supplies flu vaccine in bulk to Green Cross. The contract for this year
appears to favor the counter - stable supply at lower prices. The renewed contract will
likely make a significant contribution to the vaccine business' profitability.
Attractive business structure and valuation. - KITC Full Report - PDF - 2008 年 2 月 22 日
- Healthy business structure to overcome the limited growth of chemical-compound
drugs. While the chemical-compound drug market's growth engine has weakened,
vaccines and biomedicines are on a robust growth track thanks to appearance of highmargin
products and strong value additions. Most pharmaceutical makers lean toward
slowing chemical-compound drugs but Green Cross Corp. (Green Cross) boasts of a
healthy business portfolio, which focuses on specialty drugs such as blood derivatives,
biopharmaceuticals, and vaccines. We believe the company's strong business portfolio
makes it an attractive investment target.
- Better product mix should fully make up for heavier cost burden. Rising plasma
prices will likely hamper profitability improvement for the foreseeable future. But we
remain positive as the possibility of a price hike for blood derivatives exists because the
public is growing more aware of the need for price hikes. In addition, Green Cross should
be able to lower its COGS-to-sales ratio with an improved product mix, considering that
high-margin placenta-based drugs are selling well and GreenGene is slated for release in
- Noteworthy valuation merit. We maintain Long-term BUY but lower the six-month price
target from W130,000 to W110,000 to reflect heavier costs from rising plasma prices.
Green Cross offers a PER of 11.8x based on the 08F EPS. Sluggish 4Q07 earnings and
the exchange of exchangeable bonds into stocks dragged down the share. The recent
plunge adds to the share's valuation merits.
3Q07 earnings review. - KITC Full Report - PDF - 2007 年 10 月 22 日
- We maintain Long-term BUY with a six-month price target of W130,000 for our top pick during 4Q We present Green Cross Corp. as top pick for 4Q07 due to the following. 1) As highmargin drugs such as placenta-base medicines show rapid sales growth, margins are improving. 2) Greengene (recombinant technology-based) - the first outcome of aggressive research and development in biopharmaceuticals - will be released in early 2008. The release of Greengene is very meaningful in that it is evidence the company's research and development efforts in the biopharmaceuticals segment has borne fruit. We believe Greengene's release will significantly improve margins. 3) Considering its sales breakdown of medicines, Green Cross has less exposure to impending regulatory issues.
- 3Q07 earnings review - modest growth coupled with better profitability Green Cross had sales of W123.7bn (+32.4% YoY) and operating profit of W19.4bn (+17.5% YoY). Sales were nearly in line with our forecast of W124bn but operating profit beat our estimate of W18bn by 7.9%. The operating margin was expected to slumber compared to 2Q due to larger one-off costs such as advertising and bonuses for the Chuseok holiday. However, with the larger-than-expected operating profit, the margin improved to 15.7% and was better than 2Q. We attribute the greater margin to: 1) a significant rise in high-margin medicine sales such as placenta-base drugs, and 2) prices of raw materials for flu vaccine, which sold well during 3Q, dropped. On the nonoperating side, the Kyungnam Pharm stake disposal provided gains of W6.9bn.
- Profitability improvement to continue The company showed balanced growth across all operations. Sales of blood derivatives, placenta-based medicines and ethical drugs climbed 15.7% YoY, 70.7% YoY and 15% YoY, respectively. In particular, placenta-base medicines are making a great contribution to profitability. In addition to already modest sales of Laennec (liver aid) and Greenpla (menopausal disorder treatment), the release of Fursultiamine injection drugs (so-called garlic injection drugs as they smell like garlic) is accelerating the sales growth of the placenta-base drugs.
Our top pick for 4Q07 - KITC Full Report - PDF - 2007 年 9 月 13 日
- The signing of an MOU with Vietnam's VABIOTECH paves the way for vaccine
Green Cross recently inked an MOU with VABIOTECH to transfer varicella vaccine
technology and export vaccine materials to be manufactured at its Hwasun factory which
is currently under construction. Green Cross held the exclusive right to supply vaccine
products to VABIOTECH and started exports in June 2007, before the latter'sconstruction of vaccine production facilities in Vietnam. We estimate that exports will
amount to W6bn per year by 1H09. After the factory in Hwasun is completed in 2H09, the
two parties will discuss specific transfer terms and Green Cross will export vaccine
materials along with technology with which VABIOTECH will be able to produce up to
600,000 doses of vaccine per year. We believe the decision to transfer varicella vaccine
technology has laid the foundation for its vaccine material exports and as a result the
company will be able to expand its customer base across Asia. Along with expectations
for better vaccine margins in line with the completion of the Hwasun factory, we also
anticipate significant sales growth in the vaccine division on the back of upcoming
vaccine material exports.
- Green Cross is our pharmaceutical top pick
We maintain Long-term Buy and our six-month price target of W100,000. We
believe investment merits will grow in 4Q07 based on the following. 1) The MOU with
VABIOTECH should pave the way for overseas penetration. 2) Regulatory risks such as
the Korean Fair Trade Commission's (FTC) imposition of fines and drug repricing do not
pose a serious threat. 3) Earnings prospects for 2H07 are bright. 4) The stock trades at
12x 2008F EPS and offers valuation merits.Less exposure to policy risks. We expect the FTC's fines will be insignificant due to
the company's high COGS-to-sales ratio and low SG&A expense-to-sales ratio.
Moreover, the company will be relatively free from the government's industry-wide drug
repricing in 2H07 under which drug prices will be trimmed to the G-7 average. Green
Cross's blood ailment drugs, nearly all of which are in the planned repricing category, are
presently cheaper than the average.Strong earnings momentum in 2H07. We expect earnings to improve in 2H07 backed
by the robust sales growth of placenta-based drugs, seasonally strong sales of influenza
vaccines, and higher non-operating profit from the disposal of Kyung Nam Pharm.
Better 2H highly likely. - KITC Full Report - PDF - 2007 年 8 月 2 日
- We maintain Long-term Buy and lift the six-month price target from W92,000 to W100,000 to reflect raised earnings forecasts. Our new price target equals 13.2x the 2007F EPS and 14.2x the 2008F EPS. We derived the new price target based on the residual income model (RIM) at a risk-free interest rate of 5.3%, risk premium of 4.0% and beta of 0.59. The current price suggests 24.8% upside potential.
Our Long-term Buy recommendation is due to the following. 1) Earnings should further improve in 2H07 on the back of strong sales of high-margin placenta-based drugs and seasonally high demand for specific drugs. 2) In the biopharmaceuticals segment, the research and development efforts should soon bear fruit with the release of recombinant DNA technology-based Greengene in March 2008. 3) As the current price only equals 10.6x the 2007F EPS, valuation merit is significant.
Strong base and promising new drugs. - KITC Full Report - PDF - 2007 年 7 月 19 日
- We initiate our coverage of Green Cross Corp. with a Long-term Buy recommendation and six-month price target of W92,000. The price is based on a residual income model with cost-of-equity of 7.84% (risk-free interest rate of 5.5% and market risk premium of 4%). Our W92,000 price target equals a PER of 14.4x based on the 2007F EPS.
- Three investment points. 1) The company has less exposure to policy risks - the government's planned drug re-pricing during 2H07 and implementation of the Korea-US freetrade agreement. 2) High-margin placenta-based drugs are likely to see fast sales growth and Greengene slated for launch in March 2008 will replace Recombinate and present a 15%p higher margin than Recombinate. 3) In addition to its stocked pipeline for biopharmaceuticals, the first of its research and development efforts, recombinant DNA technology-based Greengene will be released.
- Attractive valuations. Green Cross is far undervalued compared to its peer large-caps although it has strong growth potential and higher margins. The stock price equals a PER of 11.7x based on the 2007F EPS that is far lower than the KIS pharmaceuticals sector average PER of 15.9x.