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KOREA
August 9, 2012 Company Analysis
Hanmi Pharm
(128940)
BUY (maintain)
Earnings Surprise in 2Q12
Earnings surprise in 2Q12
Domestic earnings recovery drove profitability improvement
Hyerim Kim Analyst / Pharmaceuticals, Cosmetics
82-2-2003-2914 [email protected]
Mid/longer-term profit growth potential at Beijing Hanmi healthy
Jeehoon Han RA
82-2-2003-2932 [email protected]
Current price (Aug 7)
Fair value
BUY maintained with fair value KRW127,000
KRW82,400
KRW127,000
Reuters code
Bloomberg code
128940.KS
128940 KS
Industry/Sector
Rating
Pharmaceuticals
Overweight
Market cap
Ordinary shares issued
Free float
KOSPI
KOSDAQ
Avg T/O Vol (60d)
Avg T/O Val (60d)
Foreign ownership
USD576.7mn
7,887,276shrs
59.7%
1886.8
471.6
35,948shrs
USD2.1mn
16.5%
3yr CAGR of adj EPS (12~14)
135.0%
Market’s 3yr CAGR of adj. EPS
16.9%
52wk high/low
KRW84,291 / KRW51,000
Beta (12M, daily return)
0.4
Major shareholders
Hanmi Holdings Co.,Ltd. etc. 40.0%
Price performance
Absolute
Relative
1M
21.2%
19.3%
3M
37.3%
42.4%
%
Relative performance (LHS)
10
Stock price (RHS)
0
-10
6M
35.5%
42.3%
KRW
90,000
80,000
70,000
-20
-30
Profit growth to continue in 2H12 on normalized operations and expense improvement
60,000
-40
50,000
-50
8/11 10/11 12/11 2/12 4/12 6/12
40,000
Earnings surprise in 2Q12
Hanmi Pharm’s K-IFRS consolidated 2Q12 OR came in at KRW185.4bn (up 22%YoY) and
OP at KRW11.2bn (up 74%YoY). On a stand-alone basis, OR came to KRW156.1bn (up
19%YoY) and OP KRW5.8bn (up 62%YoY). The results markedly topped our expectations
and market consensus.
Domestic earnings recovery drove profitability improvement
2Q12 OP margin posted 3.7%, improving 1%pYoY and turning to the black QoQ. The
domestic division, which continued experiencing negative growth since 2Q10 due to
strengthened regulations against rebates and sluggish marketing activities, grew 19%YoY,
boosted by recovered marketing power and strong contributions from new drug sales (Pal Pal,
Montezal, etc.). As expected, exports rose 16%YoY, driven by brisk sales of bulk
pharmaceuticals and intermediates and Amosartan (combination high-blood pressure
treatment drug) sales in the Southeast Asia region. Even considering secured inventories
(estimated at about KRW10bn) following distribution inventory reductions in 1Q12, a fasterthan expected earnings turnaround was displayed.
FY-end
(Reporting standard)
OR (KRWbn)
OP (KRWbn)
NP (KRWbn)
Parent NP (KRWbn)
EPS (KRW)
Adj. EPS (KRW)
PER* (x)
PBR (x)
EV/EBITDA (x)
Div. Yield (%)
ROE (%)
ROIC (%)
12/10A
(GAAP-P)
594.6
(16.0)
(8.0)
(8.0)
(1,031)
(1,031)
NA
2.3
101.7
NA
(2.7)
(2.1)
Source: Company data, Hyundai Securities
For explanations of equity research ratings and disclosures,
please refer to the compliance section at the end of this report.
12/11A
(IFRS-C)
606.2
22.7
5.4
1.3
164
164
543.1 - 342.3
1.5
14.0
NA
0.4
1.7
12/12F
(IFRS-P)
554.0
6.8
(5.4)
(5.4)
(720)
(720)
NA
2.0
29.1
NA
(1.7)
1.6
12/13F
(IFRS-P)
608.5
18.2
5.5
5.5
699
699
117.9
2.1
21.3
NA
1.7
3.4
12/14F
(IFRS-P)
653.0
29.9
17.6
17.6
2,125
2,125
38.8
2.1
16.4
NA
5.3
5.7
>> Hanmi Pharm
Fig 1: K-IFRS consolidated basis - 2Q12 OP up 74%YoY
2Q12P
%YoY %QoQ 2Q11A 1Q12A
(KRWbn)
OR
OP
EBT
NP
185.4
11.2
7.0
5.9
Margin (%)
OP
EBT
NP
21.9
27.7
73.8 1,045.8
178.2
TB
101.1
TB
6.0
3.8
3.2
-
-
Estimates
HRC Consensus
%Diff.
HRC Consensus
152.1
6.4
2.5
2.9
145.2
1.0
(2.4)
(0.9)
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
4.2
1.7
1.9
0.7
(1.7)
(0.6)
NA
NA
NA
NA
NA
NA
-
-
Source: Company data, Hyundai Securities
Fig 2: K-IFRS parent basis - 2Q12 OP up 74%YoY, surpassing estimates
2Q12P
%YoY %QoQ 2Q11A 1Q12A
(KRWbn)
OR
OP
EBT
NP
156.1
5.8
2.3
1.8
Margin (%)
OP
EBT
NP
18.5
37.1
62.4 (189.8)
TB (122.5)
283.0 (124.4)
3.7
1.5
1.2
-
-
Estimates
HRC Consensus
%Diff.
HRC Consensus
131.7
3.6
0.0
0.5
113.8
(6.5)
(10.1)
(7.4)
140.6
0.6
(3.3)
(3.0)
133.8
(0.8)
(2.9)
(3.2)
11.0
830.0
NA
NA
16.7
NA
NA
NA
2.7
0.0
0.4
(5.7)
(8.8)
(6.5)
0.4
(2.4)
(2.1)
(0.6)
NA
(2.4)
-
-
Source: Company data, Hyundai Securities
Profit growth to continue
in 2H12 on normalized
operations and expense
improvement
On a stand-alone basis, 3Q12 OR is expected to grow 13%YoY and OP to rise 87%YoY, leading
to a continued profit turnaround. Reductions in fixed expenses are expected to continue, powered
by domestic earnings recovery following normalized operations and gradual volume export
expansion of follow-up drugs (from original drugs with expired patents) such as Amosartan. As
a result, full-year 2012 OR is projected at KRW554bn (up 8%YoY) and OP at KRW6.8bn (up
147%YoY), providing expectations for faster-than-previously-expected profit improvement. Of
note, on a consolidated basis, 2012 OR is estimated at KRW659.1bn (up 9%YoY) and OP at
KRW31.4bn (up 39%YoY).
Fig 3: Earnings turnaround to continue in 2H12 thanks to normalized operations and cost savings
(KRWbn)
1Q11
2Q11
3Q11
4Q11
1Q12 2Q12P 3Q12F 4Q12F
2010
2011
2012F
2013F
2014F
OR
Domestic
ETC
OTC
Exports
Finished products
APIs
126.9
110.1
103.0
7.1
16.8
1.0
15.8
131.7
114.4
104.0
10.4
17.3
1.1
16.2
125.2
109.4
101.5
7.9
15.8
1.2
14.6
128.7
109.4
101.5
7.9
19.2
1.6
17.6
113.8
97.3
89.7
7.6
16.5
1.3
15.2
156.1
136.1
126.2
9.9
20.0
1.6
18.4
141.0
123.5
114.8
8.7
17.5
2.2
15.3
143.1
122.0
113.3
8.7
21.1
2.6
18.5
594.6
495.4
464.5
30.9
91.2
9.4
71.8
512.5
443.3
410.0
33.3
69.1
4.9
64.2
554.0
478.9
444.0
34.9
75.1
7.7
67.4
608.5
518.0
482.6
35.4
90.5
19.7
70.8
653.0
539.0
503.1
35.9
114.0
39.7
74.3
OP
EBT
NP
5.0
1.2
1.5
3.6
0.0
0.5
3.4
(0.3)
(0.6)
(9.2)
(12.7)
(9.5)
(6.5)
(10.1)
(7.4)
5.8
2.3
1.8
6.2
2.3
2.1
1.2
(3.6)
(1.4)
(16.0)
(17.4)
(8.0)
2.8
(11.8)
(8.1)
6.8
(9.1)
(5.0)
18.2
1.4
5.9
29.9
13.2
18.0
Margin (%)
OP
EBT
NP
3.9
1.0
1.2
2.7
0.0
0.4
2.7
(0.2)
(0.5)
(7.1)
(9.9)
(7.4)
(5.7)
(8.8)
(6.5)
3.7
1.5
1.2
4.4
1.6
1.5
0.8
(2.5)
(1.0)
(2.7)
(2.9)
(1.3)
0.5
(2.3)
(1.6)
1.2
(1.6)
(0.9)
3.0
0.2
1.0
4.6
2.0
2.8
Source: Company data, Hyundai Securities
2
>> Hanmi Pharm
Mid/longer-term profit
growth potential at
Beijing Hanmi healthy
2Q12 OR of Beijing Hanmi, 73% stake of which is owned by Hanmi Pharm, came in at
KRW32.7bn (up 53%YoY) and OP at KRW3.5bn (up 18%YoY) (based on CNY, OR grew
40%YoY, OP rose 8%YoY). Following 1Q12, it is understood Beijing Hanmi continued to see
solid top-line growth, fueled by brisk main product sales, including Mami Ai and Etanjing, and
new products sales growth, including adult drugs. On the other hand, OP margin dropped
3.1%pYoY to 10.6% on advertising expense growth following increased media ads, including
Mami Ai ads in magazines and technical publications. With future three-year CAGR of 27% for
OR and 32% for OP, driven by brisk main product sales, sales growth of new successful-bid items,
and strengthened marketing power, mid/long-term growth potential at Beijing Hanmi is expected
to be solid. Meanwhile, as expected, Hanmi Fine Chemical’s 2Q12 OR grew 8%YoY and turned
in an operating profit, bolstered by recovered domestic earnings and increased bulk
pharmaceutical and intermediates exports.
Fig 4: Strong mid/long-term growth momentum for Beijing Hanmi
(KRWbn)
OR
OP
NP
%YoY
OR
OP
NP
Margin (%)
OP
NP
1Q11
2Q11
3Q11
4Q11
2010
2011
2012F
2013F
2014F
22.5
5.4
4.5
21.4
2.9
2.4
25.2
6.5
5.4
30.1
1.3
0.7
1Q12 2Q12P 3Q12F 4Q12F
32.0
6.8
5.7
29.8
3.2
2.6
32.4
7.0
5.7
30.9
3.1
2.3
80.7
14.9
11.9
98.3
16.1
13.1
130.0
20.8
16.8
157.2
27.5
22.3
194.8
35.2
28.6
21.8
28.1
34.8
21.4
43.1
48.1
23.6
54.6
63.0
24.5
(71.7)
(81.2)
42.1
26.0
24.8
39.2
7.5
11.1
28.6
9.1
5.5
2.6
143.6
235.3
2.4
(12.4)
5.7
21.8
8.0
9.6
32.3
29.0
29.0
21.0
32.3
32.3
23.9
28.1
28.1
23.9
20.2
13.7
11.0
25.6
21.5
4.2
2.3
21.2
17.7
10.6
8.8
21.7
17.6
10.0
7.4
18.5
14.8
16.4
13.3
16.0
13.0
17.5
14.2
18.1
14.7
Source: Company data, Hyundai Securities
BUY maintained with fair
value KRW127,000
Shares have outperformed the KOSPI 19% in the past one month and 42% in the past three
months, bolstered by earnings recovery expectations amid improved industry conditions.
Domestic earnings turnaround is expected to continue, fueled by a recovery in prescription drugs
market share following normalized operations. Beijing Hanmi’s China business value should
again be spotlighted as well. With a fair value of KRW127,000, calculated by aggregating the values
of Hanmi Pharm’s domestic operations and stake in Beijing Hanmi (consolidated based 2013
forecast PER of 41x, 2014 forecast PER of 25.6x), we maintain a BUY rating and keep Hanmi
Pharm as our top pick.
Fig 5: Pharma stock prices in recovery phase amid earnings turnaround expectations
%
Dong-A
Hanmi Pharm
LG LS
Green Cross
Yuhan
20
10
0
-10
-20
-30
-40
8/11
10/11
12/11
2/12
4/12
6/12
8/12
Source: Company data, Hyundai Securities
3
>> Hanmi Pharm
Fig 6: PBR band chart
KRW'000
250
6x
200
4x
150
3x
100
2x
50
0
02
03
04
05
06
07
08
09
10
11
12
13
Source: Company data, Hyundai Securities
4
>> Hanmi Pharm
Profit & Loss
(KRWbn)
(Reporting standard)
Operating revenue
Cost of sales
Gross profit
SG&A expenses
Other operating income
Operating profit
EBITDA
Non-operating accounts
Net financing income
Profit on equity method
Net other non-operating income
Profit before tax
Income tax expense
Net profit
Profit attributable to owners of parent
Total comprehensive income
TCI, attributable to owners of parent
Net exceptionals
Adj. net profit
Statement of financial position
12/10A
(GAAP-P)
12/11A
(IFRS-C)
12/12F
(IFRS-P)
12/13F
(IFRS-P)
12/14F
(IFRS-P)
594.6
273.2
321.4
334.4
(2.9)
(16.0)
8.8
(1.4)
(13.7)
12.9
(0.7)
(17.4)
(9.4)
(8.0)
(8.0)
9.1
9.1
0.0
(8.0)
606.2
271.9
334.3
313.1
1.5
22.7
56.9
(16.2)
(16.2)
0.0
0.0
6.5
1.0
5.4
1.3
(0.3)
(5.5)
0.0
1.3
554.0
281.4
272.6
266.8
1.0
6.8
31.8
(16.3)
(16.3)
0.0
0.0
(9.5)
(4.1)
(5.4)
(5.4)
(12.2)
(12.2)
0.0
(5.4)
608.5
308.5
300.0
282.8
1.0
18.2
43.6
(17.2)
(17.2)
0.0
0.0
1.0
(4.5)
5.5
5.5
(1.3)
(1.3)
0.0
5.5
653.0
327.2
325.9
297.0
1.0
29.9
56.0
(17.2)
(17.2)
0.0
0.0
12.7
(4.9)
17.6
17.6
10.8
10.8
0.0
17.6
12/10A
(GAAP-P)
12/11A
(IFRS-C)
12/12F
(IFRS-P)
12/13F
(IFRS-P)
12/14F
(IFRS-P)
Cash and cash equivalents
Current financial assets
Trade receivables
Inventories
Other current assets
Current assets
Investment assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Other non-current assets
Non-current assets
Total assets
6.3
6.7
194.9
84.0
3.8
295.7
128.4
156.1
64.3
2.4
26.7
377.9
673.6
21.6
17.2
208.1
108.2
8.3
363.5
70.0
261.5
77.9
14.1
0.7
424.3
787.8
33.2
12.0
193.9
88.6
5.5
333.3
70.5
249.7
79.7
10.7
0.9
411.5
744.8
38.3
14.6
206.9
94.3
6.1
360.2
70.6
239.3
82.1
12.0
0.8
404.8
765.0
53.3
13.3
222.0
98.0
6.5
393.1
70.6
227.8
84.9
11.5
0.8
395.6
788.7
Trade payables
Short-term financial liabilities
Current provisions
Other current liabilities
Current liabilities
Non-current financial liabilities
Non-current provisions
Provisions for employee benefits
Deferred tax liabilities
Other non-current liabilities
Non-current liabilities
Total liabilities
42.2
132.8
0.4
34.8
210.1
134.7
8.2
28.2
0.0
0.4
171.5
381.6
34.6
121.9
0.0
49.8
206.3
177.2
9.1
10.8
3.9
2.2
203.2
409.5
38.8
109.3
0.0
38.8
186.8
210.8
9.3
9.8
1.9
1.1
233.0
419.8
42.6
111.4
0.0
42.6
196.6
219.3
9.2
10.8
2.9
1.5
243.7
440.4
45.7
112.6
0.0
45.7
204.0
223.6
9.2
11.6
2.4
1.4
248.3
452.3
12/10A
12/11A
12/12F
12/13F
12/14F
(8.0)
21.8
(14.5)
9.1
(4.7)
3.7
(14.5)
(5.9)
3.0
0.0
(8.2)
(25.5)
(2.3)
(0.4)
0.0
23.1
20.5
0.0
(1.3)
7.6
6.3
5.4
35.7
33.5
4.6
(17.9)
61.3
(18.7)
(9.2)
0.0
(11.3)
0.0
(39.2)
(21.5)
(0.3)
(0.2)
0.0
(21.9)
2.5
2.7
19.0
21.6
(5.4)
26.1
(2.5)
29.7
5.6
53.5
(11.6)
(5.5)
0.0
(0.5)
(0.2)
(17.8)
0.0
0.9
0.0
(25.1)
(24.1)
0.0
11.6
21.6
33.2
5.5
26.4
(2.7)
(11.6)
4.2
21.8
(11.8)
(6.1)
0.0
(0.1)
0.1
(17.9)
0.0
1.0
0.0
0.2
1.2
0.0
5.1
33.2
38.3
17.6
27.1
(2.9)
(13.0)
4.9
33.6
(12.0)
(6.5)
0.0
0.0
0.0
(18.6)
0.0
1.0
0.0
(1.1)
0.0
0.0
15.0
38.3
53.3
Issued capital
Share premium
Other equity interest
Accumulated other comprehensive income
Retained earnings
Equity attributable to owners of parent
17.9
270.2
(0.4)
17.1
(12.7)
292.0
18.8
330.2
(0.7)
2.4
(14.4)
336.3
19.7
330.2
(0.7)
(4.4)
(19.8)
325.0
20.7
330.2
(0.7)
(11.2)
(14.3)
324.7
21.7
330.2
(0.7)
(18.1)
3.3
336.5
Non-controlling Interests
Total equity
0.0
292.0
41.9
378.2
0.0
325.0
0.0
324.7
0.0
336.5
Total Liab. and equity
673.6
787.8
744.8
765.0
788.7
(KRW)
12/10A
12/11A
12/12F
12/13F
12/14F
57.7
26.0
8.2
(269.6)
EPS
Adj. EPS
BPS
SPS
GCFPS
DPS
3yr CAGR of adj. EPS
(1,031)
(1,031)
37,023
77,063
1,628
0
NA
164
164
42,656
76,876
5,776
0
NA
(720)
(720)
41,222
73,785
4,600
0
135.0
699
699
39,219
77,182
5,660
0
NA
2,125
2,125
38,709
78,885
6,970
0
NA
12.6
(16.8)
(275.4)
(254.5)
45.5
51.0
(5.8)
(260.3)
34.5
46.0
(14.6)
(274.9)
44.6
15.6
(2.9)
(277.8)
12/10A
12/11A
12/12F
12/13F
12/14F
(%)
NA
NA
NA
NA
NA
(2.7)
1.5
(1.3)
(1.3)
NA
NA
NA
NA
NA
3.7
9.4
0.9
0.2
NA
NA
NA
(518.5)
(518.5)
1.2
5.7
(1.0)
(1.0)
12/10A
12/11A
12/12F
12/13F
12/14F
9.8
168.3
36.9
NA
NA
3.0
7.2
0.9
0.9
7.3
64.5
28.5
219.2
219.2
4.6
8.6
2.7
2.7
(2.7)
0.4
(2.1)
5.3
(0.4)
0.0
130.7
87.2
0.6
0.4
2.3
1.7
5.3
0.3
(13.5)
108.3
68.8
3.4
(1.7)
1.0
1.6
6.8
0.2
(30.5)
129.2
84.6
1.9
1.7
2.5
3.4
7.0
0.5
(18.7)
135.6
85.6
2.4
5.3
4.1
5.7
7.0
0.8
(6.8)
134.4
80.1
3.1
Cash Flow
(KRWbn)
Net profit
Depreciation & amortization
Other non-cash adjustments
Investments in working capital
Other operating cash flow
Cash flow from operating activities
Capital expenditure
Investments in intangibles
Changes in current financial assets
Changes in investment assets
Other investment cash flow
Cash flow from investing activities
Proceeds from (repayments of) debt
Changes in equity
Dividends paid
Other financing cash flow
Cash flow from financing activities
Other cash flow
Increase/decrease in cash
Cash and cash equivalents at FYB
Cash and cash equivalents at FYE
Gross operating cash flow
Free cash flow
Net cash flow
Net cash (net debt)
Operating Statistics & Ratios
(%)
OR growth
OP growth
EBITDA growth
NP growth of parent
Adj. NP growth
OP margin
EBITDA margin
NP margin
Adj. NP margin
(KRWbn)
(Reporting standard)
Per-share Performance
Shareholder Value & Financial Structure
ROE
ROA
ROIC
WACC
ROIC/WACC (x)
Economic profit (KRWbn)
Total liab./equity
Net debt/equity
Interest coverage (x)
Note: Adj. EPS = [(Adjusted NP - preferred share dividends) + (after-tax dilution adjustment)] / (diluted avg. number of total ordinary shares outstanding)
Adjusted NP = (Parent NP) - [discontinued operation gains + (net exceptional gains) × (1 - marginal tax rate)]
Net exceptional gains: Pre-tax exceptional gains (exceptional gains attributable to parent including FX gains, derivatives gains, valuation gains, and one-off gains)
Source: Company data, Hyundai Securities
¡ Hanmi Pharm: Treasury share acquisition/disposal. Hyundai Securities has not disclosed the material contained in this report to any institutional investor or third party prior to its publication. The
author(s) confirms that the material contained herein correctly represents his/her/their opinion and that it has been prepared without any undue influences or interventions. Hyundai Securities
Co., Ltd. or any of its affiliates has not taken part in public offerings of the company(ies) covered in this report for the past 12 months. The author(s) of this report does not have any interest in
the company(ies) covered herein.
¡ Rating: Sector: Overweight (+10% or more), Neutral (-10 - +10%), Underweight (-10% or more)
Company: Strong BUY (+30% or more), BUY (+10 - +30%), Marketperform (-10 - +10%), Underperform (-10% or more)
Strong BUY = 4, BUY = 3, Marketperform = 2, Underperform = 1, Blackout/Universe Exclusion = 0 (Share price —, Fair value p, Rating —)
¡ All Hyundai Securities Research is available via the following electronic databases: Bloomberg, Thomson Reuters, FactSet. Contact your Hyundai Securities sales representative for access.
¡ This report has been prepared for informational purposes only, and does not constitute an offer or solicitation of a contract for trading. Opinions in this report reflect professional judgment at
this date based on information and data obtained from sources we consider reliable. However, we do not guarantee that the information and data are accurate or complete, and, therefore, this
report is subject to change without prior notice. Individual investment should be made based on each client’s own judgment, and we expressly disclaim all liability for any investment decisions
and any results thereof. This report is a copyrighted material of Hyundai Securities Co. and, thus, it may not be reproduced, distributed, or modified without the prior consent of Hyundai Securities
Co. This report is not prepared for academic purposes, and any third party wishing to quote from it for academic publications should receive the prior consent of Hyundai Securities Co.
KRW
140,000
Hanmi Pharm
Rating
4
120,000
3
100,000
2
80,000
1
60,000
40,000
10/8
11/8
0
12/8