Samsung Biologics Earnings: Biosimilar Segment Results Better Than Expected; Valuation Is Not Cheap

Narrow-moat Samsung Biologics’ second-quarter earnings are slightly better than expected, driven by the inflow of milestone revenue from its subsidiary Samsung Bioepis. We raise our 2024 annual growth forecast for the firm's biosimilar segment to 34.0% from 26.0%, while keeping the rest unchanged. Hence, our fair value estimate increases to KRW 709,800 per share from KRW 688,700. We think Samsung Bio's shares are mildly overvalued, currently trading at a 20% premium over our fair value estimate. The market is paying a price/earnings ratio of 58.04, based on our 2024 estimated growth. Despite positive market sentiment associated with less exposure to geopolitical risks relative to its Chinese competitors, we currently do not see a strong jump in the number of contract manufacturing projects. We believe that investors should wait for a better entry point.