Korean brokerages cut Samsung Biologics target price on rights issue dilution

Two South Korean brokerages lowered their target prices for Samsung Biologics on Oct 6 while keeping buy ratings, citing dilution from a rights issue. Hana Securities cut its target to 1.95 million won from 2.03 million won, and Daol Investment Securities lowered its target to 2.00 million won from 2.10 million won. The shares had closed the previous session at 1,354,000 won, according to Chosun Ilbo and Yonhap. [ 1 , 2 , 4 ]

Hana analyst Kim Sun-a forecast third-quarter consolidated revenue of 1.4063 trillion won, up 11.8% from a year earlier, and operating profit of 635.4 billion won, up 0.3%. That is 5.1% and 7.7% above market consensus of 1.338 trillion won and 589.7 billion won respectively, according to Maeil Business. Kim said the faster-than-expected production ramp-up at the 5th plant supports earnings despite a lower average won-dollar exchange rate in the quarter and revenue losses from the May general strike. [ 2 , 3 ]

Seoul Economic Daily reported the third-quarter average exchange rate was about 1,424 won, roughly 5% lower than in the second quarter. It said rising cost ratios and selling and administrative expenses at the 5th plant since the second quarter signal more PPQ batches, which verify that a facility and process are suitable for commercial production. At the current pace, the 5th plant's profit contribution is expected to begin in earnest in 2027, when PPQ batches convert to commercial output, the report said. The US Rockville plant was estimated to be running at about 50% of capacity, near break-even, with a meaningful revenue and profit contribution expected in 2028 and more than 500 billion won in annual revenue possible at full capacity. [ 3 ]

On labour, Samsung Biologics and its union failed to reach agreement at a third post-mediation session on Oct 1. Seoul Economic Daily said the union has announced a three-week general strike from the 26th, while Yonhap said a second general strike is planned for late this month. Daol analyst Lee Ji-soo said additional strike action could be a variable for results from the fourth quarter onward. Seoul Economic Daily added that a prolonged dispute could weigh on securing customers, since large long-term supply contracts depend on stable production capacity, though discussions with customers are recovering as US pharmaceutical tariffs and most-favoured-nation policy uncertainty ease. [ 3 , 4 ]

The brokerages' third-quarter estimates differ. Daol forecast revenue of 1.3451 trillion won, up 7.0% from a year earlier, and operating profit of 605.2 billion won, down 4.4%, saying results should meet market expectations despite the May strike and the weaker exchange rate. Daol kept a buy rating, citing the 5th plant expansion, 6th plant construction and the acquisition of a polypeptide group as valid medium- to long-term growth drivers. [ 4 ]

Yonhap reported that Samsung Biologics disclosed in August a shareholder-allocation rights issue with a general public offering of forfeited shares to raise about 3 trillion won, including funds for acquiring securities in other companies, with 2.27 million new shares to be issued. Daol said its target price reflected that dilution. Seoul Economic Daily reported that the company's rights issue prospectus included a plan to commit investment for the 6th plant within this year, and that Hana estimated fair enterprise value at 94.5 trillion won, little changed from 94.8 trillion won. [ 3 , 4 ]