Analysts slash price targets on Celltrion firms after Q1 miss

Analysts have lowered their price targets on three Celltrion Group companies (Celltrion, Celltrion Pharm, and Celltrion Healthcare) after first-quarter earnings miss and weak performance outlook.

Sentiment won’t likely recover unless investors are assured of sound pipeline in place of virus treatments and existing drugs, one analyst said.

Celltrion tested new 52-week low on Monday session at 141,000 won ($110). Shares of Celltrion Pharm and Celltrion Healthcare also remained in negative territory. The combined market capitalization of the three listed firms more than halved from highs above 66 trillion won last year.

Investor sentiment worsened as Celltrion’s first-quarter earnings missed market expectations. Celltrion reported an operating profit of 142.3 billion won for the three-month period, down 31.5 percent from a year earlier, although its sales grew 20.6 percent to 550.6 billion won. Key negative factors included a price cut of Remsima IV, increased sales of low profitable tests, costs from developing Regkirona (regdanvimab) inhalation formulation, and one-time valuation loss in Regkirona inventory.

Celltrion’s operating margin was 25.8 percent, the lowest in 13 quarters.

Bio stock analysts hurriedly slashed their price target of Celltrion. Shinhan and Heungkuk downgraded their target to 198,000 won and 190,000 won, respectively, which are lower than 210,000 won offered in the pre-pandemic era.

Profitability deterioration is inevitable due to unit price cuts for Remsima IV and Truxima throughout the year, said Shinhan analyst Lee Dong-gun, adding that a significant margin improvement can be expected towards the second half of the year thanks to product mix improvement around high-margin items like Yuflyma and a better yield of Truxima.

The downward price adjustment for Celltrion is based on changes to the 12-month forecast for net profit of controlling shareholders, said Heungkuk analyst Lee Na-kyung, adding that considering Yuflyma sales in the United States to be added from next year, and new sales from Stelara and Eyelea biosimilars, the company’s earnings are currently bottoming out.

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