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"Anticipated Concerns Already Factored into the Equation"

Hanmi Pharm reported consolidated second quarter 2023 operating profit of W33.2bn, slightly below expectations. This was due to the inclusion of a large portion of research and development (R&D) expenses and a temporary decrease in merchandise sales. However, these factors are expected to normalize in the second half of 2023. The company's stock has been negatively impacted by Hanmi Science, a major shareholder, seeking liquidity. Despite these challenges, we maintain a Buy rating on Hanmi Pharm.

In the second quarter, Hanmi Pharm achieved consolidated sales of W342.7bn, an 8% increase year-on-year. Operating profit reached W33.2bn, a 5% increase year-on-year, although it fell slightly short of consensus estimates. The sluggishness in performance can be attributed to the higher R&D costs resulting from the inclusion of EZH1/2 and BH3120 target anti-cancer drugs, as well as a decrease in the merchandise sales portion. However, the company's sales structure remains unchanged, and the decrease in merchandise sales is expected to be resolved in the second half of 2023.

Beijing Hanmi, a subsidiary of Hanmi Pharm, continued to lead growth with sales of W90.1bn, a 15% increase year-on-year. Operating profit for Beijing Hanmi also saw significant growth, reaching W21.9bn, a 28% increase year-on-year. Looking ahead, we forecast Hanmi Pharm's annual consolidated operating profit to reach W198.2bn, a 25% increase year-on-year. Despite challenges related to Hanmi Science's equity investment deal, we believe sentiment towards Hanmi Pharm will improve, and the company's share price is expected to rebound.


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