[Weekly stock relay] Analysts maintain 'buy' opinion for Hanmi based on high growth expectations

Stock analysts maintain a "buy" opinion for Hanmi Pharmaceutical, predicting that the company's earnings will exceed expectations thanks to the high growth of Beijing Hanmi Pharmaceutical and the scheduled launch of its new drugs.

Hanmi has recently stood out as one of the few pharma companies that saw its shares rise despite the sluggish stock market.

The benchmark Korea Composite Stock Price Index (KOSPI) recorded the lowest point in 20 months after closing at 2292.01 points on Wednesday, down 49.77 points (2.13 percent) from the previous trading day. However, Hanmi showed stable growth, with its shares rising about 8 percent in the past six trading days to 317,500 won ($242) as of Wednesday.

The company also reported a solid first-quarter performance, recording 321.1 billion won in sales and 40.9 billion won in operating profit on a consolidated basis. In terms of growth rate, sales and operating profit increased by 18.8 and 36.4 percent compared to last year's period.

Based on the report, Kwon Hae-soon, an analyst at Eugene Investment, predicted that Hanmi's sales for this year would increase by about 7 percent to 1.2 trillion won and operating profit to increase by 25.4 percent to 157.2 billion won based on consolidated earnings.

Kwon cited the improvement in the performance of Beijing Hanmi Pharmaceutical as the background for Hanmi's growth.

"Beijing Hanmi has been improving its sales and earnings from the second half of 2021," Kwon said. "To meet the increasing demand for cold syrup, the company has expanded its production line by about threefold, increasing the quarterly output from 75 million bottles to 220 million bottles."

Accordingly, Beijing Hanmi's earnings are likely to increase significantly in the first and fourth quarters, when demand for cough syrup increases, Kwon added.

Kwon also noted that Hanmi would start marketing Amosartan, an antihypertensive drug, in the Chinese market from the second half of this year and expected its sales to increase further next year when the treatment receives reimbursement.

"Therefore, we expect Hanmi's sales and operating profit in 2022 to reach 353.2 billion and 92.7 billion won," Kwon said.

A Daishin Securities analyst agreed.

"Beijing Hanmi Pharmaceutical is expected to show significant growth in the second quarter with sales and operating profit of the Chinese offshoot estimated to be around 73.7 billion and 11.9 billion won, up 24 and 38.6 percent compared to the same period last year," analyst Lim Yoon-jin said. "The strong growth was based on sales of major items such as Yitanjing, Hanmi's mucolytic agent for cold, increasing despite the off-season, and the strong sentiment toward Chinese yuan."

Daol Securities analyst Lee Ji-su also said, "Beijing Hanmi is estimated to have posted sales of 70.2 billion won in the second quarter due to favorable exchange rates for the Chinese yuan and the growth of existing products despite the off-season.

The three analysts predicted that the expected approval of Hanmi's new drugs for Rolontis and Poziotinib in the year's second half would further help the company bolster sales.

The U.S. Food and Drug Administration will decide on the marketing approval for Rolontis, a neutropenia treatment, and Poziotinib, a non-small cell lung cancer (NSCLC) treatment, in September and November.

"The FDA will conduct due diligence for Rolontis at Hanmi's Pyeongtaek bio plant in July, and the company will announce the results of phase 1 clinical trial on receiving Rolontis on the same day of chemotherapy within this year," Lim said. "If the study results are positive, the company will be able to secure both convenience and price competitiveness compared to the competitive drug Neulasta, developed by Kyowa Kirin."

Kwon said, "The launch of two new drugs, Rolontis and Poziotinib, in the U.S. market is an important earnings growth driver that can offset the possibility of slowing growth in the Korean market."

Lee added that Hanmi has plenty more of R&D momentum, even when excluding Rolontis and Poziotinib, in the second half.

“Clinical results of other drug candidates, such as Dual Antagonist HM12525A, a nonalcoholic steatohepatitis (NASH) treatment currently under development by Merck, will come in the second half," Lee said.

Lim pointed out that if the study confirms HM12525A's special effect in reducing fatty liver compared to Novo Nordisk's Ozempic, Hanmi will be able to accelerate the entry into the late phase clinical trials and receive additional milestones.

All three analysts concluded that their brokerage maintained a "buy" opinion for Hanmi's shares. However, while Kwon and Lim maintained their target price at 360,000 won, Lee increased the target price expected by his brokerage from 360,000 won to 380,000 won.