Direction of shares depends on earningsfile.myasset.com/.../0116/...4Q14_Preview_Final.pdf · earnings slightly below consensus but above their respective 3Q14 earnings. Yuhan Corp

Sector Report Jan 16, 2015

Pharmaceuticals/bio (NEUTRAL)

Company Rating TP (won)

Yuhan Corp BUY (M) 250,000 (D)

Green Cross BUY (M) 148,000 (M)

Hanmi Pharm BUY (M) 120,000 (U)

Donga ST BUY (U) 99,000 (M)

Chong Kun Dang BUY (M) 80,000 (D)

Medy-Tox BUY (M) 400,000 (U)

Seegene BUY (M) 42,000 (D)

KolonLifeScience BUY (M) 57,000 (D)

4Q14 key pharmas’ sales, OP

1.0%5.4%

-17.4%

34.1%

-30%

-20%

-10%

0%

10%

20%

30%

40%

YoY QoQSales Operating profit

Source: Yuanta Securities

4Q14 key bio firms’ sales, OP

10.2%

-11.0%

40.6%

-50.2%-60%

-40%

-20%

0%

20%

40%

60%

YoY QoQ

Sales Operating profit


Pharma sector: Introduction of the “two-out system” in Jul 2014, whereby drugs twice

identified as being involved in rebate scandals worth at least W100mn are delisted from

national insurance coverage, resulted in disappointing 3Q14 earnings at top-tier pharmas like

Hanmi Pharm, Donga ST, and Chong Kun Dang. We expect earnings to trend down until at

least 1H15, with key pharmas posting 4Q14 earnings slightly below consensus but above their

respective 3Q14 earnings.

Yuhan Corp (BUY, TP W250,000) should see sales grow 5% YoY on strong performance of

licensed-in products introduced from multinational pharmas including Boehringer Ingelheim.

Green Cross (BUY, TP W148,000) is expected to post seasonally soft 4Q14 earnings. Its 2015

sales may be weak due to intensifying competition in the Korean seasonal flu vaccine market

(Ilyang Pharm and SK Chemicals) and base effect after it received payment from Thailand’s

Red Cross for the completion of blood fraction facilities in Thailand.

Hanmi Pharm’s (BUY, TP W120,000) 4Q14 earnings are expected to remain flat from the

previous quarter due to higher R&D expenses.

Donga ST’s (BUY, TP W99,000) sales should improve QoQ, as 3Q14 ethical drug sales

dipped 19% YoY.

Chong Kun Dang’s (BUY, TP W80,000) 4Q14 earnings are likely to fall significantly short of

consensus due to the introduction of the two-out system and higher R&D expenses.

Bio sector: The rally in the bio sector started in the US in 2012 and is still ongoing, with active

M&A movements in 2014. This has triggered investors in Korea to pay attention to bio players

rather than traditional pharmas.

Medy-Tox (BUY, TP W400,000) should post record sales of W13.5bn (+46% YoY) for 4Q14,

as 3Q14’s strong facial filler exports (bound for Japan in particular) have remained intact.

Seegene (BUY, TP W42,000) is expected to see a slight QoQ improvement in 4Q14, but not

as good as much as in 4Q13. We expect it to sign two~three alliance agreements with global

molecular diagnosis companies this year.

Kolon Life Science (BUY, TP 57,000) is expected to see a QoQ sales increase in 4Q14

despite the weak yen. Yet, operating profit is likely to fall significantly below consensus.

Pharmaceuticals/bio 4Q14 preview

Direction of shares depends on earnings

2

Pharmaceuticals/bio

Earnings recovery not likely to come in 4Q14

4Q14 earnings estimates of major pharmas (Wbn)

4Q13 1Q14 2Q14 3Q14 4Q14E % YoY % QoQ4Q14E

(Consensus)

Yuhan Corp (separate) Sales 258.2 225.8 254.5 259.1 271.8 5.3 4.9 273.8

OP 19.9 14.0 16.1 13.4 20.8 4.5 55.1 21.5

OPM (%) 7.7 6.2 6.3 5.2 7.7 7.9

RP 25.0 38.4 18.8 17.2 38.1 52.4 121.0 35.4

NP 22.9 30.3 13.4 11.8 34.3 49.8 189.9 29.7

Green Cross (consolidated) Sales 242.4 199.3 235.7 282.4 254.8 5.1 -9.8 255.8

OP 5.5 13.9 19.5 51.6 7.9 43.6 -84.7 9.8

OPM (%) 2.3 7.0 8.3 18.3 3.1 3.8

RP 1.2 34.8 16.9 59.5 7.6 533.3 -87.2 8.9

NP 1.6 28.1 12.3 44.9 6.1 281.3 -86.4 6.5

Hanmi Pharm (consolidated) Sales 194.0 184.1 186.4 179.3 0.0 -100.0 -100.0 193.6

OP 17.2 17.9 8.4 1.2 0.0 -100.0 -100.0 6.1

OPM (%) 8.9 9.7 4.5 0.7 3.2

RP 11.7 16.6 6.0 -0.3 0.0 -100.0 -100.0 3.3

NP 9.3 14.4 7.4 1.1 0.0 -100.0 -100.0 2.0

Hanmi Pharm (individual) Sales 147.6 137.0 148.0 138.2 144.4 -2.2 4.5 149.3

OP 10.5 8.2 2.2 -7.4 -4.8 -145.7 -35.0 -1.7

OPM (%) 7.1 6.0 1.5 -5.3 -3.3 -1.1

RP 4.6 6.8 0.0 -9.5 -6.9 -250.0 -27.1 -7.5

NP 4.2 8.3 2.2 -4.5 -4.4 -204.8 -1.8 -18.9

Dong-A ST (individual) Sales 150.0 144.0 147.9 133.3 144.5 -3.7 8.4 146.2

OP 10.8 11.0 11.3 13.8 11.6 7.4 -15.8 12.3

OPM (%) 7.2 7.7 7.6 10.3 8.0 8.4

RP 17.2 10.2 8.1 13.8 10.4 -39.5 -24.4 11.0

NP 12.3 7.5 6.2 10.5 7.3 -40.7 -30.5 8.5

Chong Kun Dang (individual) Sales 130.2 138.7 137.0 127.3 132.5 1.8 4.1 137.7

OP 12.1 15.2 17.4 13.0 16.4 35.5 26.0 19.2

OPM (%) 9.3 11.0 12.7 10.2 12.4 13.9

RP 7.5 14.2 16.5 12.0 15.2 102.7 27.0 18.0

NP 6.2 10.8 11.4 9.2 11.1 79.0 20.2 13.4

Total (excl. Green Cross, individual Hanmi Pharm)

Sales 686.0 645.5 687.4 657.9 693.2 1.0 5.4 707.0

OP 53.3 48.5 47.0 32.8 44.0 -17.4 34.1 51.3

OPM (%) 7.8 7.5 6.8 5.0 6.3 7.3

NP 45.6 56.9 33.2 27.1 48.3 5.9 78.3 32.7

Note: Consolidated net profit is from controlling interest

Source: WiseFn, Yuanta Securities

3

Sector Report

The introduction of the “two-out system” in Jul 2014, whereby drugs twice identified as being

involved in rebate scandals worth at least W100mn are delisted from national insurance coverage,

resulted in disappointing 3Q14 earnings at top-tier pharmas like Hanmi Pharm, Donga ST, and

CKD. We expect earnings to trend down till at least 1H15 with key pharmas posting 4Q14

earnings slightly below consensus but above their respective 3Q14 earnings.

Yuhan Corp (BUY, TP W250,000) should see sales grow 5% YoY on strong performance of

licensed-in products from multinational pharmas including Boehringer Ingelheim. Growing

licensed-in product sales and active pharmaceutical ingredient exports to multinational pharmas

are driving solid sales growth, with expectations for 2015 earnings improvement still intact.

Green Cross (BUY, TP W148,000) is unlikely to be affected much by the two-out system since it

focuses on blood derivatives and vaccines, although it is expected to post seasonally soft 4Q14

earnings. Its 2015 sales may be weak due to intensifying competition in the Korean seasonal flu

vaccine market (Ilyang Pharm and SK Chemicals) and base effect after receiving W30bn from

Thailand’s Red Cross for the construction of blood fraction facilities. It is also currently talking with

Indonesia’s Red Cross about building similar facilities in the country, which should be positive for

2015 earnings.

Hanmi Pharm’s (BUY, TP W120,000) 4Q14 earnings are expected to remain flat QoQ due to

higher R&D expenses. More than 60% of its R&D spending is on bio products, with US clinical

trials for its diabetes and obesity treatment project “the Quantum” (LAPSCA-Exendin-4, LAPSInsulin115, LAPSInsulin Combo) accounting for most of the bio R&D spending. Of particular note,

the firm got interim results for LAPSCA-Exendin-4 in Dec 2014, with the final result to be out around

Jul 2015. R&D spending is likely to decline from 2Q15. We estimate R&D spending at W130bn in

2014, W120bn in 2015, and W100bn in 2016, weighing significantly on earnings.

Donga ST’s (BUY, TP W99,000) sales should improve QoQ in 4Q14, because in 3Q14, ethical

drug sales dipped 19% YoY. With concerns over export delays somewhat eased now, exports

should grow considerably (4Q14E: W38.2bn, +29% YoY, 2014E: W117.2bn, flat YoY). When it won

a World Health Organization (WHO) bid to be the most preferred supplier of tuberculosis (TB)

treatment in early 2014, we expected its TB drug exports to the WHO to grow from US$16mn in

2013 to US$22mn in 2014. Still, it turned out that the supply period was from Apr 2014 to Mar

2015 and the WHO delayed order placements. This is why the firm’s 1Q~3Q14 exports came to

W79bn (-9.8% YoY) only.

Chong Kun Dang’s (BUY, TP W80,000) 4Q14 earnings are likely to fall significantly short of

consensus due to the introduction of the two-out system and higher R&D expenses. We expect

the firm to receive $6.5mn (half in cash and the other half in Zafgen shares) from Zafgen in

milestone payments and recognize it in 4Q14, as CKD-732 (beloranib, obesity treatment) licensed

out to Zafgen enters the US clinical IIb (obesity) and phase III (Prader-Willi syndrome) trials. Its

headcount increased from 1,712 at end-2013 to 1,779 at end-3Q14.

4

Pharmaceuticals/bio

Korean bio sector led by Medy-Tox!

4Q14 earnings estimates of major bio firms (Wbn)

4Q13 1Q14 2Q14 3Q14 4Q14F % YoY % QoQ4Q14E

(Consensus)

Medy-Tox (consolidated)

Sales 9.2 13.3 16.1 32.1 17.4 89.1 -45.9 16.5

OP 4.1 7.5 9.5 26.4 10.0 143.9 -62.2 9.1

OPM (%) 44.6 56.4 59.0 82.2 57.5 55.3

RP 4.9 7.8 10.8 27.3 10.1 106.1 -63.0 9.5

NP 4.2 6.6 8.6 21.8 7.7 83.3 -64.7 8.9

Seegene (separate)

Sales 16.5 13.0 13.9 12.7 13.5 -18.2 6.5 17.4

OP 4.3 2.1 3.6 2.7 3.2 -25.6 16.5 4.6

OPM (%) 26.1 16.0 25.9 21.7 23.7 26.4

RP 4.3 2.4 1.5 3.0 3.9 -9.3 29.6 4.9

NP 3.2 2.1 1.3 2.8 2.7 -15.6 -2.4 3.8

Kolon Life Science (individual)

Sales 33.3 33.5 36.2 28.2 34.1 2.4 20.9 37.4

OP 2.2 3.3 4.6 0.7 1.7 -22.7 129.4 4.5

OPM (%) 6.6 9.9 12.7 2.6 5.0 11.9

RP 0.7 3.0 3.7 0.5 1.5 114.3 217.8 4.1

NP 0.8 2.5 1.9 0.6 1.6 100.0 189.3 3.9

Total

Sales 59 60 66 73 65 10.2 -11.0 71

OP 11 13 18 30 15 40.6 -50.2 18

OPM (%) 18.0 21.6 26.7 41.0 22.9 25.5

NP 8 11 12 25 12 46.3 -52.3 17

Note: Consolidated net profit is from controlling interest

Source: WiseFn, Yuanta Securities

The rally in the bio sector started in the US in 2012 and is still ongoing, with active M&A

movements in 2014. This has triggered investors in Korea to pay attention to bio players rather

than traditional pharmas. Samsung Biologics succeeded in drawing and maintaining investor

attention to the bio-similar sector, but the sector is not offering enough choices for institutional

investors now.

Medy-Tox (BUY, TP W400,000) is expected to post record sales (excluding upfront fees from

Allergen) of W13.5bn (+46% YoY) for 4Q14, as 3Q14’s strong facial filler exports (bound for Japan

in particular) have remained intact. Its 4Q14 exports are estimated at W6.9bn (+62% YoY),

domestic sales at W6.5bn (+33% YoY), and adjusted operating margin (excluding upfront fees

from Allergen) at 45%. It aims for sales growth of more than 15% in 2015, with exports likely to

grow faster than local sales on growing filler demand overseas. Next-generation botulinum toxin is

expected to enter phase III clinical trials in 4Q15.

Seegene (BUY, TP W42,000) is expected to see a slight QoQ improvement in 4Q14, but not as

much as in 4Q13. We expect it to sign two to three alliance agreements with global molecular

diagnosis companies this year on similar terms and conditions to the one it entered into with

Beckman Coulter in Nov 2014.

5

Sector Report

Kolon Life Science (BUY, TP W57,000) is expected to see a QoQ sales increase in 4Q14 despite

the weak yen. Yet, its operating profit is likely to fall significantly below consensus. We also believe

4Q14 saw a variety of expenses. Although its active pharmaceutical ingredient exports to Japan

will likely grow 15~20% YoY in 2015, the weak yen is expected to hurt their earnings contribution.

6

Pharmaceuticals/bio

Domestic pharmaceuticals/bio firms’ valuation table

Domestic pharmaceutical firms’ valuation table (2015E) (Wbn)

Mkt cap Sales OP NPOPM

(%)

Sales(% YoY)

OP(% YoY)

NP(% YoY)

ROE (%)2015E P/E (x)

2016E P/E (x)

2015EP/B (x)

Returns(YTD %)

Yuhan Corp 1,873.1 1,098.2 79.8 99.8 7.3 8.5 21.6 18.2 7.8 19.0 17.0 1.3 -2.1

Green Cross (cons) 1,525.1 1,009.2 99.5 77.4 9.9 3.6 8.2 -12.8 8.3 19.7 18.2 1.6 -4.7

Hanmi Pharm (cons) 1,053.8 801.1 52.0 37.3 6.5 7.4 46.6 35.1 7.4 28.3 20.1 2.0 1.0

Hanmi Pharm (separate) 1,053.8 598.0 16.2 8.1 2.7 4.7 659.8 TTB 2.4 130.9 56.2 3.1 1.0

Dong-A ST 655.4 601.5 54.7 36.7 9.1 5.1 13.9 14.0 7.4 17.9 15.7 1.3 -7.2

Daewoong Pharmaceutical 780.9 774.9 72.7 59.4 9.4 6.1 11.2 42.3 12.1 13.1 12.2 1.4 0.3

Chong Kun Dang 568.3 569.2 69.3 48.4 12.2 4.8 5.7 9.5 13.6 11.7 10.8 1.5 -7.5

Average 5.7 109.6 17.7 8.4 34.4 21.5 1.7 -2.7

Celltrion 4,314.4 - - - - - - - - - - - 2.2

Binex 242.8 75.0 7.0 6.0 9.3 25.0 180.0 179.1 5.7 40.5 24.3 2.2 4.9

SK Chemicals (cons) 1,333.0 7,857.3 203.4 77.1 2.6 1.0 -1.6 76.7 5.6 18.6 14.1 0.9 -5.5

SK Chemicals (separate) 1,333.0 1,346.8 49.7 19.4 3.7 7.5 14.9 12.5 - 74.0 - - -5.5

LG Life Sciences (cons) 695.3 469.0 18.7 6.9 4.0 10.7 39.8 251.3 2.7 102.1 47.6 2.7 14.6

Medy-Tox (cons) 1,988.3 92.1 62.3 54.3 67.7 18.1 19.3 20.8 45.2 36.6 32.5 12.9 9.8

Seegene 837.6 70.3 16.8 14.2 23.8 14.7 28.7 43.9 12.6 59.1 41.1 6.5 1.7

Macrogen (cons) 279.7 57.7 6.3 9.5 10.9 11.0 72.6 43.9 12.8 29.4 24.1 3.5 22.6

Kolon Life Science 318.2 151.3 18.0 14.9 11.9 11.7 34.0 57.4 10.5 21.3 18.2 2.1 -3.7

i-Sens 632.4 114.5 25.9 24.4 22.6 21.6 32.6 41.9 18.3 25.9 20.0 4.3 10.1

Value Added Technology (Cons) 410.7 228.5 36.6 21.7 16.0 16.6 25.1 39.7 19.9 18.9 14.9 3.4 5.7

Vieworks (cons) 343.1 102.8 22.8 18.5 22.2 34.9 40.8 44.9 22.5 18.6 14.6 3.8 0.0

JVM 386.8 103.8 25.5 21.8 24.6 20.4 33.0 49.1 18.9 17.8 15.2 3.0 1.7

Osstem Implant (cons) 548.9 258.6 35.4 25.3 13.7 14.1 31.4 42.3 21.2 21.7 17.7 4.2 8.4

Osstem Implant (separate) 548.9 186.0 36.0 27.0 19.4 12.1 24.1 35.0 18.1 20.3 18.3 3.4 8.4

Daewon Pharmaceutical 276.5 201.0 25.4 21.7 12.6 12.9 30.9 36.2 14.8 12.8 10.4 1.8 15.8

Korea United Pharm 253.6 164.6 23.7 20.1 14.4 9.4 14.9 19.6 12.0 12.6 11.3 1.4 16.8

Samjin Pharm 328.0 214.9 36.5 25.2 17.0 5.7 11.7 7.3 18.1 13.0 11.3 1.9 10.3

Kyung Dong Pharm (cons) 337.2 162.8 36.8 26.7 22.6 8.4 3.8 5.1 13.5 12.6 11.8 1.5 3.7

Whan In Pharm 389.7 139.4 26.4 20.5 19.0 16.9 10.9 10.3 10.4 19.0 17.2 1.8 -8.9

Huons 661.1 170.6 26.7 22.4 15.6 12.2 22.0 23.1 15.3 29.5 26.1 4.2 7.7

ViroMed 786.6 - - - - - - - - - - - 5.1

Genexine 408.8 - - - - - - - - - - - 16.4

Legochem Biosciences 136.3 - - - - - - - - - - - 2.9

Average 14.6 33.4 51.0 15.7 29.9 20.6 3.4 5.5

Note: As of Jan 13, 2015, TTB = turn to black

Source: DataGuide, Yuanta Securities

7

Sector Report

Overseas pharmas’ valuation table

Big pharma valuation table (2015E) ($mn)

Mkt cap

Sales OP NP OPM

(%) Sales

(% YoY) OP

(% YoY) ROE

(%) P/E

(x) P/B (x)

EV/ EBITDA

P/E prem

(%)

Price(% YTD)

Mkt (% YTD)

Novartis AG 260,415 56,512 12,286 13,934 21.7 -3.2 3.6 17.6 16.8 3.3 14.8 4.7 6.1 2.8

Sanofi 120,560 40,674 11,758 8,256 28.9 2.9 4.4 12.3 14.5 2.0 11.2 7.3 1.8 0.1

Pfizer Inc 206,473 48,098 18,802 13,582 39.1 -2.4 -3.6 17.4 14.8 2.6 9.6 -4.9 5.2 -1.0

Roche Holding AG 241,075 49,123 18,967 13,577 38.6 5.8 5.8 47.3 17.8 13.9 12.8 11.0 5.6 2.8

GlaxoSmithKline PLC 104,756 37,144 10,219 6,502 27.5 6.1 -0.1 73.5 15.1 13.6 10.2 9.4 3.4 -0.4

Merck & Co Inc 177,609 40,699 13,484 9,964 33.1 -3.8 -2.3 20.0 17.8 3.9 14.2 10.9 9.7 2.8

Avg 0.9 1.3 31.3 16.2 6.5 12.1 6.4 5.3 1.2

Big biotech valuation table (2015E) ($mn)

Mkt cap

Sales OP NP OPM

(%) Sales

(% YoY) OP

(% YoY) ROE

(%) P/E

(x) P/B (x)

EV/ EBITDA

P/E prem

(%)

Price(% YTD)

Mkt (% YTD)

Gilead Sciences 152,692 28,330 18,554 15,192 65.5 17.0 15.0 69.5 10.3 11.3 12.5 -41.7 7.4 -1.6

Amgen 118,832 20,909 9,198 7,110 44.0 4.9 9.3 26.1 16.8 4.7 14.1 -5.2 -1.9 -1.6

Biogen Idec 82,144 11,213 5,085 3,833 45.4 15.6 18.7 32.6 21.3 7.9 18.1 19.9 2.5 -1.6

Celgene 93,448 9,266 4,749 3,989 51.3 20.9 22.2 51.8 24.2 16.2 30.7 36.2 4.6 -1.6

Shire 41,126 6,384 2,556 2,303 40.0 6.6 20.7 25.3 18.0 - 22.9 1.4 -1.6 -1.6

Regeneron Pharma 42,021 3,476 1,227 1,399 35.3 24.3 46.7 40.5 34.2 16.5 42.1 92.5 0.8 -1.6

Avg 14.9 22.1 41.0 20.8 11.3 23.4 17.2 1.9 -1.6

Indian pharma valuation table (2015E) ($mn)

Mkt cap

Sales OP NP OPM

(%) Sales

(% YoY) OP

(% YoY) ROE

(%) P/E

(x) P/B (x)

EV/ EBITDA

P/E prem

(%)

Price(% YTD)

Mkt (% YTD)

Sun Pharmaceutical 27,800 2,993 1,275 1,018 42.6 12.9 13.4 29.5 27.5 9.3 16.3 59.0 0.8 0.2

Lupin Ltd 10,372 2,155 555 380 25.8 17.3 18.7 28.7 27.1 9.3 13.5 57.1 0.4 0.2

Dr Reddy's Laboratories 8,844 2,379 464 365 19.5 8.7 7.6 22.8 24.1 6.0 13.7 39.4 -0.7 0.2

Cipla Ltd 8,233 1,846 329 225 17.8 14.3 11.2 13.1 36.3 5.1 14.6 110.4 1.6 0.2

Cadila Healthcare Ltd 5,433 1,369 230 176 16.8 17.1 36.5 27.6 31.2 9.8 19.0 80.8 2.9 0.2

Ranbaxy Laboratories Ltd 4,346 2,093 248 198 11.9 - - 29.3 26.9 8.1 - 55.8 1.1 0.2

Avg 14.1 17.5 25.2 28.8 7.9 15.4 67.1 1.0 0.2

Chinese pharma valuation table (2015E) ($mn)

Mkt cap

Sales OP NP OPM

(%) Sales

(% YoY) OP

(% YoY) ROE

(%) P/E

(x) P/B (x)

EV/ EBITDA

P/E prem

(%)

Price(% YTD)

Mkt (% YTD)

Sinopharm Group Co 10,635 37,953 10,635 37,953 1,508.4 551.9 4.0 18.7 19.4 18.1 15.0 2.8 9.9 65.6

Yunnan Baiyao Group 10,914 3,553 10,914 3,553 547.0 481.9 15.4 17.3 22.2 21.8 17.9 6.4 - 78.3

Jiangsu Hengrui Medicine 9,763 1,481 9,763 1,481 359.8 300.8 24.3 22.8 24.6 32.6 26.8 8.1 - 167.4

Shanghai Fosun 8,344 2,371 8,344 2,371 384.4 423.1 16.2 20.0 23.4 18.7 15.8 3.1 - 52.9

Shanghai Pharmaceuticals 7,211 16,973 7,211 16,973 619.1 458.2 3.6 16.0 16.3 13.9 12.3 1.5 10.2 27.2

CSPC Pharmaceutical 5,227 1,599 5,227 1,599 277.4 222.8 17.4 13.5 30.8 23.6 18.7 5.5 18.8 115.5

Avg 406.4 13.5 18.0 22.8 21.4 17.7 4.5 13.0 84.5

Note: As of Jan 13, 2015, Source: Thomson, Yuanta Securities

8

Pharmaceuticals/bio

Yuhan Corp (BUY, TP W250,000) valuation Revise down TP from W260,000 to W250,000 to reflect conservative target P/E

Yuhan Corp: SOTP valuation (Wbn)

2015E

Value of subsidiary stake (A) 680

Value of operations (B) 1,395

Adj net profit (excl dividends from subsidiaries) 78

Target P/E (x) 18

Value of treasury shares (common and preferred: C) 178

Net debts (D) -465

Non-biz assets (Est gains from sale of old plant site in Gunpo: E) 90

Target market cap (A+B+C-D+E) 2,808

Shares outstanding 11,388,734

Target price (won) 246,589

Current price (Jan 12) 170,000

Upside 45.1%


Yuhan Corp: value of subsidiary stake (A) (Wbn)

Subsidiaries Stake (%) 2014E

equity-method gainsTarget P/E

Discount due to liquidity issue

Value Business area

Yuhan Kimberly 30.0 45.6 18.0 30% 575 Diapers, tissues, etc

Yuhan Clorox 50.0 2.9 10.0 30% 20 Cleaning product

Janssen Korea 30.0 0.6 10.0 30% 4 Pharmaceutical

Yuhan Chem (cons) 100.0 6.3 18.0 30% 80 API

Yuhan Medica (cons) 100.0 0.0 8.0 30% 0 Health supplement, OTC

Subsidiary value (A) 680


9

Sector Report

Yuhan (000100 KS) pro forma financial statements (K-IFRS, individual)

Statement of comprehensive income Statement of financial position

FY ends Dec (Wbn) 2012A 2013A 2014E 2015E 2016E FY ends Dec (Wbn) 2012A 2013A 2014E 2015E 2016E

Sales 763 932 1,011 1,071 1,121 Current assets 604 650 725 809 898

Cost of sales 526 648 714 749 782 Cash & cash equiv 182 266 317 382 456

Gross profit 237 283 298 322 340 Accts rec & other 173 215 232 244 255

SG&A 207 227 233 242 253 Inventory 93 85 92 98 103

Operating profit 30 56 64 80 87 Non-current assets 741 740 739 741 743

EBITDA 45 70 77 91 96 Tangible assets 154 153 150 148 147

Non-op profit/loss 63 34 48 51 55 Investment in affiliate 310 313 315 318 321

Forex gain/loss -5 -1 0 0 0 Other non-current 149 147 147 147 147

Net interest inc 16 12 12 15 17 Total assets 1,345 1,390 1,465 1,550 1,642

Equity-meth gain/loss 0 0 0 0 0 Current liabilities 150 188 200 207 213

Other 52 23 36 37 38 Accts payable & other 134 177 189 195 201

Net prof before income tax 93 90 112 132 142 ST financial liabilities 0 0 0 0 0

Income tax 23 18 23 27 29 Liquid LT liabilities 0 0 0 0 0

Net profit from cont op 70 72 90 105 113 Non-current liabilities 42 27 27 27 27

Net profit from discont op 0 0 0 0 0 LT financial liabilities 0 0 0 0 0

Net profit 70 72 90 105 113 Debentures 0 0 0 0 0

NP for controlling int 70 72 90 105 113 Total liabilities 192 215 227 233 239

Total comprehensive inc 75 61 78 94 102 Equity, controlling int 1,153 1,175 1,238 1,316 1,402

TCI for controlling int 75 61 78 94 102 Paid-in capital 57 57 57 57 57

Note: Operating profit calculation same as K-GAAP (sales - COGS - SG&A). Capital surplus 112 114 114 114 114

Retained earnings 1,008 1,065 1,140 1,229 1,327

Equity, non-control int 0 0 0 0 0

Total equity 1,153 1,175 1,238 1,316 1,402

Net debt -337 -349 -400 -465 -539

Total debt 0 0 0 0 0

Cash flow statement Valuation FY ends Dec (Wbn) 2012A 2013A 2014E 2015E 2016E FY ends Dec 2012A 2013A 2014E 2015E 2016E

Operating cash flow 78 87 103 119 128 EPS (won) 6,212 6,414 8,021 9,402 10,097

Net profit 70 72 90 105 113 BPS (won) 109,285 112,863 119,749 127,325 135,657

Depreciation & amort 14 13 12 10 8 EBITDA/shr (won) 3,969 6,108 6,763 8,023 8,424

Forex gain/loss 4 1 0 0 0 SPS (won) 66,978 81,801 88,790 94,023 98,466

Affiliate invest gain/loss 0 0 0 0 0 DPS (won) 1,250 1,500 1,500 1,500 1,750

Inc(dec) net working cap -28 -16 -30 -30 -27 P/E (x) 22.2 29.4 21.1 18.0 16.7

Other 19 17 32 33 34 P/B (x) 1.3 1.7 1.4 1.3 1.2

Investing cash flow -38 35 -43 -43 -43 EV/EBITDA (x) 27.0 25.5 19.6 15.8 14.3

Investment 0 -3 -3 -3 -3 PSR (x) 2.1 2.3 1.9 1.8 1.7

Inc in tangible assets -15 -10 -8 -8 -8

Dec in tangible assets 0 1 0 0 0 Key financial dataOther -23 47 -33 -33 -33 FY ends Dec 2012 2013 2014E 2015E 2016E

Financing cash flow -10 -38 -16 -16 -16 Sales (% YoY) 14.3 22.1 8.5 5.9 4.7

Inc(dec) in ST fin liab 0 0 0 0 0 Operating profit (%YoY) -42.2 84.1 15.1 24.7 7.7

Inc(dec) in LT fin liab 0 0 0 0 0 NP, CI (%YoY) -16.3 3.3 24.9 17.1 7.4

Inc(dec) in equity 0 0 0 0 0 Gross margin (%) 31.1 30.4 29.4 30.1 30.3

Cash dividend -13 -13 -16 -16 -16 Operating margin (%) 4.0 6.0 6.4 7.5 7.7

Other 3 -25 0 0 0 NP, CI margin (%) 9.1 7.7 8.9 9.8 10.1

Other cash flow 0 0 7 6 5 EBITDA margin (%) 5.9 7.5 7.6 8.5 8.6

Inc (dec) in cash & eq 29 83 51 65 74 ROIC (%) 7.8 16.1 18.3 22.1 23.0

Beginning cash & equiv 153 182 266 317 382 ROA (%) 5.3 5.3 6.3 7.0 7.1

Ending cash & equiv 182 266 317 382 456 ROE (%) 6.2 6.2 7.4 8.2 8.3

NOPLAT 3 6 6 8 9 Debt-to-equity (%) 16.7 18.3 18.3 17.7 17.1

FCF -6 33 26 38 43 Net debt-to-equity (%) -29.2 -29.7 -32.3 -35.3 -38.4

OP/financing cost (x) 0.0 0.0 0.0 0.0 0.0

Note: EPS, BPS, P/E and P/B are based on controlling interest

For valuation metrics such as P/E, historical figures are based on annual averages, estimates on current price

For ROA or ROE, assets and equity are averages of end-of-year figures for given year and year prior

Data to 2010 based on K-GAAP and from 2011, K-IFRS


10

Pharmaceuticals/bio

Green Cross (BUY, TP W148,000) valuation Maintain TP; implying target P/E of 22x (10% discount to top-tier target P/E of 20x).

Green Cross: earnings estimate revision (K-IFRS, consolidated) (Wbn)

Current Previous Change (%)

2014E 2015E 2016E 2014E 2015E 2016E 2014E 2015E 2016E

Sales 972 960 1,003 975 963 1,004 -0.3% -0.2% -0.1%

*R&D costs 78 77 80 80 79 83 -2.8% -2.8% -3.1%

R&D% 8.0% 8.0% 8.0% 8.2% 8.2% 8.2%

Operating profit 93 97 104 92 95 101 1.2% 2.2% 2.5%

Op margin (%) 9.5% 10.1% 10.4% 9.4% 9.9% 10.1%

Net prof before income tax 119 100 106 112 94 100 5.9% 5.6% 5.9%

NP for controlling int 92 77 81 86 73 77 6.0% 5.7% 5.9%

EPS (won) 7,826 6,554 6,946 7,388 6,207 6,559 5.9% 5.6% 5.9%

Target P/E (x) 22 22

Target price (won) 144,188 152,812

Target price (2015~2016 avg) 148,500

Current price (won) 129,500

Upside (%) 14.7%


11

Sector Report

Green Cross (006280 KS) pro forma financial statements (K-IFRS, consolidated)



Sales 812 888 972 960 1,003 Current assets 461 561 620 654 679



SG&A 179 196 210 211 219 Inventory 211 250 274 270 282



Non-op profit/loss -1 12 26 2 2 Investment in affiliate 14 11 11 11 11

Forex gain/loss 0 0 0 0 0 Other non-current 125 104 104 104 104

Net interest inc -1 -1 -3 -4 -6 Total assets 954 1,104 1,243 1,354 1,457

Equity-meth gain/loss -3 -3 28 6 6 Current liabilities 224 209 218 215 220








Total comprehensive inc 71 73 95 79 84 Equity, controlling int 672 823 901 964 1,031



Retained earnings 385 446 523 585 652


Total equity 685 839 919 983 1,052

Net debt 53 1 39 49 78

Total debt 82 48 98 148 178






Affiliate invest gain/loss 0 0 -28 -6 -6 DPS (won) 1,250 1,250 1,250 1,250 1,250

Inc(dec) net working cap -30 -63 -48 -6 -29 P/E (x) 26.7 21.9 16.5 19.8 18.6

Other 11 4 -1 -1 -1 P/B (x) 2.1 1.9 1.7 1.6 1.5

Investing cash flow -90 -70 -103 -103 -103 EV/EBITDA (x) 16.7 15.3 13.8 13.2 12.8

Investment -62 36 0 0 0 PSR (x) 1.8 1.7 1.6 1.6 1.5


Dec in tangible assets 1 0 0 0 0 Key financial dataOther 36 -22 -3 -3 -3 FY ends Dec 2012 2013 2014E 2015E 2016E

Financing cash flow 30 46 36 36 16 Sales (% YoY) 5.7 9.4 9.4 -1.2 4.4

Inc(dec) in ST fin liab 45 -51 0 0 0 Operating profit (%YoY) -12.9 6.0 17.8 5.0 6.7

Inc(dec) in LT fin liab 1 15 50 50 30 NP, CI (%YoY) -3.1 30.6 30.5 -16.3 6.0




Other cash flow 0 0 42 20 20 EBITDA margin (%) 11.1 10.9 11.7 12.5 12.5

Inc (dec) in cash & eq -10 5 12 41 1 ROIC (%) 9.7 9.1 9.1 8.6 8.3




FCF -23 -66 -54 -6 -25 Net debt-to-equity (%) 7.8 0.1 4.4 5.0 7.5







12

Pharmaceuticals/bio

Hanmi Pharm (BUY, TP W120,000) valuation We revise up our target price to W120,000, by applying a target P/E of 30x (50% premium to top-

tier pharmas’ target P/E of 20x) 2016 EPS, when R&D expenses are likely to stabilize. R&D

expenses are expected to decline from 2Q15, falling from W130.0bn in 2014E to W120.0bn in

2015E and W100.0bn in 2016E, but they could drop faster than that.

Hanmi Pharm: earnings estimate revision (K-IFRS, separate) (Wbn)


2014E 2015E 2016E 2014E 2015E 2016E 2014E 2015E 2016E

Sales 564 579 600 564 579 600 0.0% 0.0% 0.0%


Op margin (%) 0.0% 1.8% 5.7% 0.0% 1.8% 5.7%

Net prof before income tax -8 2 26 -9 1 25 -5.7% 54.5% 2.4%

Net profit (separate) 4 2 19 -17 1 19 -123.8% 60.0% 2.1%

Equity-method gain/loss 20 20 22 20 20 22 0.0% 0.0% 0.0%

Net profit (consolidated) 24 22 42 3 21 41 802.3% 2.8% 1.0%

EPS (consolidated, won) 2,341 2,155 4,071 272 2,201 4,233 759.4% -2.1% -3.8%

Current price (won) 101,500 101,500 101,500

P/E (consolidated) 43 47 25

Target P/E (x) 30 30

Target price (won) 64,654 122,121

Upside 20.3%


13

Sector Report

Hanmi Pharm (128940 KS) pro forma financial statements (K-IFRS, individual)



Sales 544 563 564 579 600 Current assets 314 325 324 320 334



SG&A 261 252 270 265 255 Inventory 79 67 67 69 71



Non-op profit/loss -16 -8 -8 -9 -8 Investment in affiliate 55 55 55 55 55

Forex gain/loss -2 -1 0 0 0 Other non-current 70 78 78 78 78

Net interest inc -14 -12 -12 -12 -12 Total assets 699 719 732 739 763



Net prof before income tax 6 27 -8 2 26 ST financial liabilities 70 96 96 96 96

Income tax -1 1 -12 0 6 Liquid LT liabilities 100 20 20 20 20





Total comprehensive inc 14 29 7 5 23 Equity, controlling int 315 343 354 360 383



Retained earnings -24 0 4 6 25


Total equity 315 343 354 360 383

Net debt 223 190 191 202 198

Total debt 290 265 265 265 265


Operating cash flow 41 56 33 25 41 EPS (won) 892 3,136 425 153 1,887




Affiliate invest gain/loss 0 0 0 0 0 DPS (won) 0 0 0 0 0

Inc(dec) net working cap 0 2 2 -5 -8 P/E (x) 87.6 46.4 239.0 664.3 53.8

Other 12 11 10 10 10 P/B (x) 2.0 3.5 2.8 2.9 2.7


Investment 0 1 0 0 0 PSR (x) 1.1 2.1 1.7 1.8 1.7


Dec in tangible assets 0 4 0 0 0 Key financial dataOther -22 -1 -2 -2 -2 FY ends Dec 2012 2013 2014E 2015E 2016E

Financing cash flow 22 -25 4 1 0 Sales (% YoY) 6.1 3.5 0.1 2.8 3.7

Inc(dec) in ST fin liab -13 26 0 0 0 Operating profit (%YoY) 1,136.7 63.0 -99.7 10,200.0 232.0

Inc(dec) in LT fin liab 35 -40 0 0 0 NP, CI (%YoY) -186.5 269.2 -84.2 -61.8 1,135.1


Cash dividend 0 0 0 0 0 Operating margin (%) 3.9 6.1 0.0 1.8 5.7


Other cash flow 0 0 -7 -5 -5 EBITDA margin (%) 8.2 9.4 3.3 5.3 9.3

Inc (dec) in cash & eq 32 19 -3 -11 4 ROIC (%) 6.1 8.0 0.0 2.1 5.6




FCF 42 38 -10 -5 10 Net debt-to-equity (%) 71.1 55.3 53.9 56.0 51.6







14

Pharmaceuticals/bio

Dong-A ST (BUY, TP W99,000) valuation We maintain our target price, for which we applied a target P/E of 24x (20% premium to top-tier

pharmas’ target P/E of 20x) considering the value of its new antibiotics “Sivextro.”

Dong-A ST: earnings estimate revision (K-IFRS, separate) (Wbn)


2014E 2015E 2016E 2014E 2015E 2016E 2014E 2015E 2016E

Sales 570 586 607 570 586 607 0.0% 0.0% 0.0%


Op margin (%) 8.4% 8.6% 8.9% 8.2% 8.4% 8.8%


NP 32 32 36 31 32 35 2.6% 2.2% 2.3%

EPS (won) 4,172 4,209 4,644 4,073 4,111 4,544 2.4% 2.4% 2.2%

Target P/E (x) 24



Upside (%) 19.4%


15

Sector Report

Donga ST (170900 KS) pro forma financial statements (K-IFRS, individual)






SG&A 397 223 252 261 273 Inventory 131 92 105 108 112



Non-op profit/loss 0 -22 -5 -7 -6 Investment in affiliate 126 9 17 26 35

Forex gain/loss 8 2 1 1 1 Other non-current 37 17 17 17 17

Net interest inc -8 -9 -9 -9 -8 Total assets 1,426 926 962 975 991


Other 0 -15 3 1 1 Accts payable & other 117 77 82 82 83

Net prof before income tax 89 17 43 44 48 ST financial liabilities 124 57 33 8 -16


Net profit from cont op 68 -65 31 32 36 Non-current liabilities 291 316 336 336 336


Net profit 68 -65 31 32 36 Debentures 214 250 250 250 250

NP for controlling int 68 -65 31 32 36 Total liabilities 679 486 487 463 440

Total comprehensive inc 61 -59 38 39 42 Equity, controlling int 746 439 475 511 551

TCI for controlling int 61 -59 38 39 42 Paid-in capital 56 37 37 37 37


Retained earnings 425 -59 -30 0 34


Total equity 746 439 475 511 551

Net debt 29 208 213 199 185

Total debt 388 352 348 323 299


Operating cash flow 58 -15 32 50 51 EPS (won) 0 -12,162 4,172 4,209 4,644

Net profit 68 -65 31 32 36 BPS (won) 0 57,081 61,683 66,445 71,643

Depreciation & amort 27 20 24 24 23 EBITDA/shr (won) 0 10,539 9,309 9,595 10,062

Forex gain/loss -8 -2 -1 -1 -1 SPS (won) 0 87,677 73,981 76,085 78,824


Inc(dec) net working cap -49 16 -27 -10 -11 P/E (x) - -10.7 20.3 20.1 18.2

Other 20 17 5 5 5 P/B (x) - 2.3 1.4 1.3 1.2

Investing cash flow -8 -34 -43 -43 -43 EV/EBITDA (x) - 19.4 12.1 11.5 10.8

Investment 0 1 -9 -9 -9 PSR (x) - 1.5 1.1 1.1 1.1


Dec in tangible assets 0 1 0 0 0 Key financial dataOther 48 -4 -2 -2 -2 FY ends Dec 2012 2013 2014E 2015E 2016E

Financing cash flow 154 -14 -15 -35 -35 Sales (% YoY) 2.6 -46.7 14.9 2.8 3.6

Inc(dec) in ST fin liab 47 -24 -24 -24 -24 Operating profit (%YoY) -9.1 -55.5 21.0 5.7 7.7

Inc(dec) in LT fin liab 162 20 20 0 0 NP, CI (%YoY) 11.7 -196.4 -148.2 3.1 10.3


Cash dividend -11 0 -2 -2 -2 Operating margin (%) 9.5 8.0 8.4 8.6 8.9

Other -44 -9 -9 -9 -9 NP, CI margin (%) 7.3 -13.2 5.5 5.5 5.9

Other cash flow 0 0 -149 17 17 EBITDA margin (%) 12.5 12.0 12.6 12.6 12.8

Inc (dec) in cash & eq 204 -62 -175 -11 -9 ROIC (%) 9.8 -23.1 6.1 6.2 6.5

Beginning cash & equiv 155 359 297 121 111 ROA (%) 5.1 -5.6 3.3 3.3 3.6

Ending cash & equiv 359 297 121 111 101 ROE (%) 9.2 -11.0 6.9 6.6 6.7


FCF -9 -144 -1 19 20 Net debt-to-equity (%) 3.9 47.3 44.8 39.0 33.5







16

Pharmaceuticals/bio

Chong Kun Dang (BUY, TP W80,000) valuation We revise down our target price from W87,000 to W80,000 to reflect lower earnings estimates and

our target P/E of 16x (20% discount to top-tier pharmas’ target P/E of 20x).

Chong Kun Dang: earnings estimate revision (K-IFRS, separate) (Wbn)


2014E 2015E 2016E 2014E 2015E 2016E 2014E 2015E 2016E

Sales 535 562 585 540 570 594 -0.9% -1.3% -1.6%

Operating profit 62 67 72 67 72 78 -7.3% -7.0% -7.7%

Op margin (%) 11.6% 12.0% 12.3% 12.4% 12.7% 13.1%

Net prof before income tax 58 64 70 63 69 76 -7.9% -7.5% -8.1%

Net profit 43 47 51 46 51 56 -7.8% -7.5% -8.3%

EPS (won) 4,525 5,008 5,434 4,910 5,414 5,915 -7.8% -7.5% -8.1%

Target P/E (x) 16.0



Upside (%) 37.0%


17

Sector Report

Chong Kun Dang (185750 KS) pro forma financial statements (K-IFRS, separate)






SG&A 195 39 228 238 249 Inventory 60 71 70 73 76



Non-op profit/loss -2 -2 -4 -3 -2 Investment in affiliate 37 0 0 0 0

Forex gain/loss -1 0 0 0 0 Other non-current 17 9 9 9 9















Total equity 358 298 337 381 428

Net debt 49 108 82 32 -20

Total debt 126 125 125 125 125


Operating cash flow 50 10 73 71 74 EPS (won) 0 3,006 4,525 5,008 5,434

Net profit 26 4 43 47 51 BPS (won) 0 31,703 35,846 40,473 45,475

Depreciation & amort 12 3 27 30 28 EBITDA/shr (won) 0 7,363 9,477 10,409 10,634

Forex gain/loss 0 0 0 0 0 SPS (won) 0 58,745 56,903 59,772 62,142


Inc(dec) net working cap -2 0 3 -7 -6 P/E (x) - 22.8 12.9 11.7 10.8

Other 14 2 1 1 1 P/B (x) - 2.2 1.6 1.4 1.3

Investing cash flow -63 -2 -40 -15 -15 EV/EBITDA (x) - 69.7 7.1 5.9 5.3

Investment 0 0 0 0 0 PSR (x) - 1.2 1.0 1.0 0.9


Dec in tangible assets 0 0 0 0 0 Key financial dataOther -19 -1 0 0 0 FY ends Dec 2012 2013 2014E 2015E 2016E

Financing cash flow -9 0 -3 -3 -3 Sales (% YoY) 4.3 -81.3 520.3 5.0 4.0

Inc(dec) in ST fin liab -3 0 0 0 0 Operating profit (%YoY) -16.1 -86.9 723.7 8.4 6.5

Inc(dec) in LT fin liab 3 0 0 0 0 NP, CI (%YoY) -47.6 -82.8 863.9 10.7 8.5


Cash dividend -9 0 -3 -3 -3 Operating margin (%) 12.5 8.7 11.6 12.0 12.3

Other 0 0 0 0 0 NP, CI margin (%) 5.6 5.1 8.0 8.4 8.7






FCF -6 7 36 58 60 Net debt-to-equity (%) 13.8 36.3 24.2 8.4 -4.7







18

Pharmaceuticals/bio

Medy-Tox (BUY, TP W400,000) valuation We revise up our target price from W290,000 to W400,000, as we lift our earnings estimates. We

used DCF methodology to derive our target price.

Medy-Tox: earnings estimate revision (K-IFRS, consolidated) (Wbn)


2014E 2015E 2016E 2014E 2015E 2016E 2014E 2015E 2016E

Sales 79 97 114 78 96 112 1.4% 1.5% 1.3%


Op margin (%) 68% 68% 69% 64% 65% 67%


Net profit from controlling int 45 56 66 40 50 61 12.0% 10.5% 8.7%

EPS (won) 7,914 9,842 11,690 7,077 8,907 10,751 11.8% 10.5% 8.7%


Medy-Tox DCF valuation (Wbn)

2014E 2015E 2016E 2017F 2018F Continuing

NOPLAT 42.7 52.9 62.6 107.8 84.7

Depreciation & amortization 2.1 3.3 4.6 4.7 4.9

Free cash 44.8 56.2 67.2 112.5 89.6

Working capital increase 2.7 -0.5 7.4 13.5 -6.3

Capex (tangible & intangible assets) 14.0 1.0 1.0 1.0 1.0

Total investment 16.7 0.5 8.4 14.5 -5.3

Free cash flow 28.1 55.7 58.8 98.0 94.9 99.6

PVIF(present value interest factor) 1.00 0.92 0.84 0.77 0.71 0.65 0.65

PV of FCF 28.1 51.1 49.5 75.6 67.2

Terminal value 2,824.9

Share price calculation

FCF growth (normalized, %) 5.0 Beta 1.2

Terminal growth (%) 5.5 Rf 2.0

WACC 9.0 Risk premium 6.0

PV of FCF 271 Dividend yield (%) 0.4

PV of continuing value 1,834 Re 9.6

Sum 2,105

Net debt -127 We 0.9

Equity value 2,232 Wd 0.1

Shares outstanding ('000) 5,657 Re 9.6

Share price (calculated) 394,613 Rd 2.0

Current price 335,400 WACC 9.0

Upside 17.7%


19

Sector Report

Medy-Tox Inc. (086900 KS) pro forma financial statements (K-IFRS, consolidated)






SG&A 16 18 19 23 26 Inventory 1 2 2 2 3



Non-op profit/loss 1 0 3 3 4 Investment in affiliate 0 0 0 0 0

Forex gain/loss 0 0 -1 -1 -1 Other non-current 0 0 0 0 0

Net interest inc 1 0 3 4 5 Total assets 71 79 184 215 255














Total equity 55 61 100 147 203

Net debt -18 -10 -96 -127 -160

Total debt 8 8 8 8 8






Affiliate invest gain/loss 0 0 0 0 0 DPS (won) 500 1,000 1,500 2,000 2,500

Inc(dec) net working cap -4 1 -3 1 -7 P/E (x) 21.2 48.8 44.4 35.7 30.1

Other 3 0 2 2 2 P/B (x) 5.7 11.0 18.8 12.7 9.3


Investment 0 1 0 0 0 PSR (x) 9.0 17.8 25.2 20.5 17.5


Dec in tangible assets 0 0 0 0 0 Key financial dataOther -8 10 -1 -1 -1 FY ends Dec 2012 2013 2014E 2015E 2016E

Financing cash flow 0 -7 -5 -7 -10 Sales (% YoY) 67.1 7.9 101.6 22.8 17.1

Inc(dec) in ST fin liab -2 4 0 0 0 Operating profit (%YoY) 98.1 -1.6 218.7 23.8 18.3

Inc(dec) in LT fin liab 3 -2 0 0 0 NP, CI (%YoY) 108.6 -7.3 213.0 24.4 18.8




Other cash flow 0 0 59 -21 -21 EBITDA margin (%) 51.8 47.6 70.3 71.6 73.0

Inc (dec) in cash & eq 0 4 86 31 32 ROIC (%) 45.3 32.9 71.9 76.8 85.8




FCF 5 0 28 56 59 Net debt-to-equity (%) -33.1 -16.8 -96.4 -86.4 -78.8







20

Pharmaceuticals/bio

Seegene (BUY, TP W42,000) valuation We revise down our target price from W71,000 to W42,000, as adjust our earnings estimates and

factor in the impact of a 50% bonus issue (one bonus share per two shares held).

Seegene: earnings estimate revision (K-IFRS, separate) (Wbn)


2014E 2015E 2016E 2014E 2015E 2016E 2014E 2015E 2016E

Sales 53 59 66 53 59 66 0.0% 0.2% 0.0%


Op margin (%) 22% 23% 26% 21% 23% 25%


Net profit 9 11 14 9 11 14 2.3% 3.6% 2.2%

EPS (won) 350 449 563 508 648 820 -31.1% -30.7% -31.3%


Seegene DCF valuation (Wbn)

2014E 2015E 2016E 2017F 2018F Continuing

NOPLAT 9.5 11.3 14.1 17.5 21.3

Depreciation & amortization 3.6 3.9 4.3 4.7 4.9

Free cash 13.1 15.2 18.4 22.2 26.2

Working capital increase -3.3 6.6 8.2 9.5 10.2

Capex (tangible & intangible assets) 2.0 2.3 2.5 2.7 2.9

Total investment -1.3 8.9 10.7 12.2 13.1

Free cash flow 14.4 6.3 7.7 10.0 13.1 13.6

PVIF (present value interest factor) 1.00 0.93 0.87 0.81 0.76 0.70 0.70

PV of FCF 14.4 5.9 6.7 8.1 9.9

Terminal value 1,403

Share price calculation

FCF growth (normalized, %) 4.0 Beta 1.1

Terminal growth (%) 6.3 Rf 2.0

WACC 7.3 Risk Premium 6.0

PV of FCF 45 Dividend Yield (%) 0.0

PV of continuing value 988 Re 8.6

Sum 1,033

Net debt -24 We 0.7

Equity value 1,057 Wd 0.3

Shares outstanding ('000) 25,305 Re 8.6

Share price (calculated) 41,771 Rd 4.1

Current price 33,550 WACC 7.3

Upside 24.5%


21

Sector Report

Seegene, Inc. (096530 KS) pro forma financial statements (K-IFRS, separate)






SG&A 23 30 30 33 37 Inventory 5 9 8 9 10



Non-op profit/loss -2 -2 -1 0 0 Investment in affiliate 3 2 1 0 -1

Forex gain/loss -1 0 -1 0 0 Other non-current 1 1 1 1 1

Net interest inc 0 -1 0 0 0 Total assets 84 129 145 161 179

Equity-meth gain/loss 0 -1 1 1 1 Current liabilities 7 15 18 22 27













Total equity 42 84 98 109 123

Net debt 19 -4 -20 -24 -29

Total debt 32 33 37 41 45


Operating cash flow 4 -3 22 14 16 EPS (won) 695 581 350 449 563


Depreciation & amort 1 1 2 2 2 EBITDA/shr (won) 1,117 1,051 601 699 850


Affiliate invest gain/loss 0 1 -1 -1 -1 DPS (won) 0 0 0 0 0

Inc(dec) net working cap -14 -24 3 -7 -8 P/E (x) 91.7 104.4 95.9 74.7 59.6

Other 6 8 8 8 9 P/B (x) 19.7 12.0 8.6 7.7 6.8


Investment 4 -1 0 0 0 PSR (x) 16.1 16.9 15.9 14.4 12.8


Dec in tangible assets 0 0 0 0 0 Key financial dataOther -11 -7 -6 -7 -7 FY ends Dec 2012 2013 2014E 2015E 2016E

Financing cash flow -8 34 8 4 4 Sales (% YoY) 31.3 14.1 -9.8 10.7 12.7

Inc(dec) in ST fin liab 0 4 4 4 4 Operating profit (%YoY) 20.5 15.2 -17.7 19.0 24.6

Inc(dec) in LT fin liab 0 30 0 0 0 NP, CI (%YoY) -2.7 5.2 -7.6 28.5 25.3


Cash dividend 0 0 0 0 0 Operating margin (%) 23.6 23.9 21.8 23.4 25.9

Other -8 0 0 0 0 NP, CI margin (%) 17.6 16.2 16.6 19.3 21.5






FCF -3 -10 14 6 8 Net debt-to-equity (%) 45.5 -4.9 -20.7 -22.2 -23.6







22

Pharmaceuticals/bio

Kolon Life Science (BUY, TP W57,000) valuation We revise down our target price from W60,000 to W57,000, as we cut earnings estimate, but

consider the value of “Tissuegene-C.”

Kolon Life Science earnings estimate revision (K-IFRS, separate) (Wbn)


2014E 2015E 2016E 2014E 2015E 2016E 2014E 2015E 2016E

Sales 132 138 148 138 148 159 -4.0% -6.9% -7.2%

Operating profit 10 11 12 13 14 16 -19.5% -24.6% -24.7%

Op margin (%) 7.8% 7.8% 8.1% 9.3% 9.6% 9.9%

Net prof before income tax 9 9 11 10 12 14 -16.3% -21.0% -24.3%

Net profit 7 8 9 8 11 12 -18.5% -21.7% -24.2%

EPS (won) 1,020 1,244 1,409 1,245 1,586 1,859 -18.1% -21.6% -24.2%

Value of operations 166 2015E net profit x target P/E of 20x; per-share value of operations W25,000

Value of Tissuegene-C 212 60% of Medipost (selling “Cartistem”) market cap of W352.7bn; per-share value of Tissuegene W32,000

Total value 378 Target price W57,000

Current market cap 323 Current price W48,200

Upside (%) 17%

Implied 2015E P/E (x) 38.7

Implied P/E (x) of target price 43.4


23

Sector Report

Kolon Life Science Inc. (102940 KS) pro forma financial statements (K-IFRS, separate)






SG&A 24 25 24 25 27 Inventory 36 43 41 43 46



Non-op profit/loss -1 1 -2 -1 -1 Investment in affiliate 0 0 0 0 0

Forex gain/loss -1 -1 -1 -1 -1 Other non-current 4 4 4 4 4








Net profit 19 17 7 8 9 Debentures 18 0 -15 -30 -45







Total equity 107 124 130 136 143

Net debt 44 41 32 22 19

Total debt 60 62 66 71 76







Inc(dec) net working cap -2 -12 2 -3 -5 P/E (x) 14.8 23.0 47.2 38.7 34.2

Other 3 4 4 4 4 P/B (x) 2.8 3.2 2.5 2.4 2.3


Investment -4 0 0 0 0 PSR (x) 2.0 2.8 2.4 2.3 2.2


Dec in tangible assets 0 0 0 0 0 Key financial dataOther 0 -1 0 0 0 FY ends Dec 2012 2013 2014E 2015E 2016E

Financing cash flow 19 1 5 3 3 Sales (% YoY) 20.5 -1.2 -5.5 4.4 7.3

Inc(dec) in ST fin liab 2 0 0 0 0 Operating profit (%YoY) 77.3 -17.8 -43.7 4.0 11.2

Inc(dec) in LT fin liab 10 2 5 5 5 NP, CI (%YoY) 69.2 -8.9 -61.5 25.4 13.2


Cash dividend 0 -4 0 -2 -2 Operating margin (%) 15.8 13.1 7.8 7.8 8.1

Other 0 0 0 0 0 NP, CI margin (%) 13.4 12.3 5.0 6.0 6.4






FCF -40 -1 10 12 5 Net debt-to-equity (%) 41.1 33.4 24.5 16.0 13.5







24

Pharmaceuticals/bio

Yuhan (000100 KS) ratings and target price history

Date Rating TP (won)

2015-01-14 BUY 250,000

2014-12-22 BUY 260,000

2014-12-01 BUY 260,000

2014-11-28 BUY 260,000

2014-11-20 BUY 260,000

2014-10-29 BUY 260,000

2014-10-14 BUY 260,000

2014-10-06 BUY 260,000

2014-09-01 BUY 260,000

2014-08-19 BUY 260,000

Source: Yuanta Securities Green Cross (006280 KS) ratings and target price history


2015-01-14 BUY 148,000

2014-12-22 BUY 148,000

2014-12-01 BUY 148,000

2014-11-28 BUY 148,000

2014-11-20 BUY 148,000

2014-11-05 BUY 148,000

2014-10-29 BUY 148,000

2014-10-14 BUY 148,000

2014-10-06 BUY 148,000

2014-09-01 BUY 148,000


Hanmi Pharm (128940 KS) ratings and target price history


2015-01-14 BUY 120,000

2014-12-22 BUY 97,000

2014-12-01 BUY 97,000

2014-11-28 BUY 97,000

2014-11-20 BUY 97,000

2014-11-03 BUY 97,000

2014-10-29 BUY 110,000

2014-10-14 BUY 110,000

2014-10-06 BUY 125,000

2014-09-01 BUY 125,000


0

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Jan-13 Jul-13 Jan-14 Jul-14 Jan-15

Current PriceTarget Price

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Sector Report

Donga ST (170900 KS) ratings and target price history


2015-01-14 BUY 99,000

2014-12-22 HOLD 99,000

2014-12-01 HOLD 99,000

2014-11-28 HOLD 99,000

2014-11-20 HOLD 99,000

2014-11-03 HOLD 99,000

2014-10-29 BUY 130,000

2014-10-14 BUY 130,000

2014-10-06 BUY 130,000

2014-09-01 BUY 130,000


Chong Kun Dang (185750 KS) ratings and target price history


2015-01-14 BUY 80,000

2014-12-22 BUY 87,000

2014-12-01 BUY 87,000

2014-11-28 BUY 87,000

2014-11-20 BUY 87,000

2014-11-03 BUY 87,000

2014-10-29 BUY 100,000

2014-10-14 BUY 100,000

2014-10-06 BUY 100,000

2014-09-01 BUY 100,000


Medy-Tox Inc. (086900 KS) ratings and target price history


2015-01-14 BUY 400,000

2014-12-22 BUY 290,000

2014-12-01 BUY 290,000

2014-11-28 BUY 290,000

2014-11-20 BUY 290,000

2014-10-29 BUY 290,000

2014-10-14 BUY 290,000

2014-10-06 BUY 220,000

2014-09-01 BUY 220,000

2014-08-19 BUY 220,000


020,00040,00060,00080,000

100,000120,000140,000160,000180,000200,000

Apr-13 Oct-13 Apr-14 Oct-14


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Pharmaceuticals/bio

Seegene, Inc. (096530 KS) ratings and target price history


2015-01-14 BUY 42,000

2014-12-22 BUY 68,000

2014-12-01 BUY 68,000

2014-11-28 BUY 68,000

2014-11-20 BUY 68,000

2014-10-29 BUY 71,000

2014-10-14 BUY 71,000

2014-10-06 BUY 71,000

2014-09-01 BUY 71,000

2014-08-19 BUY 71,000


Kolon Life Science Inc. (102940 KS) ratings and target price history


2015-01-14 BUY 57,000

2014-12-22 BUY 60,000

2014-12-01 BUY 60,000

2014-11-28 BUY 60,000

2014-11-20 BUY 60,000

2014-10-29 BUY 60,000

2014-10-20 BUY 60,000

2014-10-14 BUY 70,000

2014-10-06 BUY 70,000

2014-09-01 BUY 70,000


Disclosures & disclaimers This research report has been prepared for informational purposes only; it does not constitute an offer or a solicitation of an offer to buy or sell any securities or other financial instruments. The information and data contained in this report have been obtained from sources we consider reliable; however, we make no representation that the information provided in this report is accurate or complete, and it should not be relied on as such. The recipient of this report should use his/her independent judgment regarding the sale or purchase of any securities or financial instruments mentioned herein. We disclaim any liability whatsoever for any direct or consequential loss arising from any use of this report or its contents. This report is for our clients only. It is copyrighted material and may not be reproduced, transmitted, quoted, or distributed in any manner without the prior written consent of Yuanta Securities Korea Co., Ltd.

As of the publication date of this report, Yuanta Securities Korea Co., Ltd. does not own a stake in excess of 1%, nor does it have any interest whatsoever, in the subject company (ies). The material contained herein was not disclosed by Yuanta Securities Korea Co., Ltd. to any institutional investors or third parties prior to its publication. The analyst (s) of this report or the analyst (s)’ spouse does not have any financial interest in the securities of the subject company (ies) mentioned herein, nor financial interest of any nature related to the subject company (ies) (including without limitation, whether it consists of any option, right, warrant, future, long or short position), as of the publication date of this report.

Analyst certification I/We, as the research analyst/analysts who prepared this research report, do hereby certify that the views expressed in this report accurately reflect my/our personal views about the subject securities discussed in this report.

Stock and sector ratings Stock ratings include an Investment Rating (Strong Buy, Buy, Hold, Sell) based on the expected absolute return of a stock over

the next 6 -12 months. - Strong Buy: Expected to return 30% or more - Buy: Expected to return between 10% and 30% - Hold: Expected to return between -10 and +10%

- Sell: Expected to return -10% or less

Sector ratings suggest 6 to 12 - month forward investment weighting of a given sector compared to its market capitalization weighting.

- Overweight: Investment weighting is higher than the market capitalization weighting - Neutral: Investment weighting is equal to the market capitalization weighting - Underweight: Investment weighting is lower than the market capitalization weighting

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27

Sector Report

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Documents

Direction of shares depends on earningsfile.myasset.com/.../0116/...4Q14_Preview_Final.pdf · earnings slightly below consensus but above their respective 3Q14 earnings. Yuhan Corp