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[Alpha Biz= Paul Lee] Kiwoom Securities lowered its target price for GC Pharma from 170,000 won to 160,000 won on Thursday, citing weaker-than-expected first-quarter earnings due to losses from its subsidiaries.
However, the brokerage maintained a "Buy" rating, noting that GC Pharma’s stock, which has fallen about 35% so far this year, is unlikely to decline much further. Kiwoom also expects subsidiary losses to improve in the second half of the year.
Kiwoom estimates that GC Pharma posted first-quarter sales of 406.5 billion won and an operating profit of 4.5 billion won. While sales would represent a 14% increase year-on-year, operating profit would mark a turnaround from a loss in the same period last year. Nevertheless, the estimated operating profit falls about 40% short of the current market consensus of 7.4 billion won.
"Despite improvements on a standalone basis, growing losses at subsidiaries have continued to weigh on consolidated earnings," Kiwoom Securities explained.
The losses from subsidiaries are expected to gradually shrink. GC Cell, for instance, has been streamlining its workforce and optimizing costs since earlier this year. Additionally, GC’s blood centers are projected to return to profitability around the fourth quarter, as they are expected to obtain FDA licenses for newly acquired blood facilities and normalize operations.
Alphabiz Reporter Paul Lee(hoondork1977@alphabiz.co.kr)
