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Antidepressants

The harder the life, the better for Korea's Whanin Pharm

Generic antidepressant maker's Q1 earnings up sharply

By Jun 02, 2021 (Gmt+09:00)

(Source: Getty Images Bank)
(Source: Getty Images Bank)

"When life gets too hard, this is the pharmaceutical company stock you must buy," advises the title of Hanwha Securities' recent research note on Whanin Pharmaceutical Co.

The small-sized generic maker of antipsychotics, including antidepressants, delivered an earnings surprise in the first quarter of this year, reporting a 66.8% surge in operating profit to 12.1 billion won ($11 million). Sales picked up 7.6% year on year to 45.2 billion won during the quarter.

The addition of generic versions of four new antidepressants drove its profitability further higher, fueling a 33% surge in its share price since the start of the year.

As social distancing and travel restrictions continued in the prolonged pandemic, demand for its antidepressants increased sharply. 

Whanin is the country's No. 1 player in the mental illness treatment market with a 19.2% share. Its mainstay products also include treatments for schizophrenia, bipolar disorder and attention deficit hyperactivity disorder. Antipsychotic medications account for 81% of its sales.

Last year, South Koreans spent a combined 646 billion won on mental illness treatment, up 72% from five years earlier. According to the welfare ministry's recent survey, 22.8% of the respondents were found to be in the risk group for depression. The number is more than six times higher than the 3.8% survey result in 2018, before the COVID-19 pandemic. 

In the research note, Hanwha Securities sees the pharmaceutical stock having room to surge by 50% from Tuesday's closing level, suggesting 33,000 won as a target price. Meanwhile, eBEST Investment & Securities recommended 26,000 won as its target price for the drug maker.

Whanin's share price rose to its strongest finish in nearly three years at 22,050 won on Monday. It closed flat on Tuesday, which marked its highest close since Sept. 3, 2018, when it ended at 22,100 won.

"Ironically, Whanin is a company that grows when more people are stressed -- due to COVID-19, skyrocketing real estate prices and tumbling cryptocurrency prices," said Hanwha Investment analyst Kim Hyung-soo in the note.

With a market capitalization of 410 billion won, Whanin has a much lower debt-to-equity ratio than its domestic peers. Its gearing ratio came to only 11.1% in 2020, lower than the industry average of 50%.

Its operating profit margin has exceeded 15% annually over the past 10 years. 

Write to Sung-mi Shim at smshim@hankyung.com

Yeonhee Kim edited this article.

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