Samsung Biologics (207940.KS) is expected to extend its growth streak in the third quarter despite a stronger won against the dollar and production disruptions caused by a labor dispute. Both revenue and operating profit are projected to beat market estimates as its fifth plant ramps up faster than anticipated.
Hana Securities forecast third-quarter consolidated revenue of 1.41 trillion won ($991 million) and operating profit of 635.4 billion won ($447 million). That represents an 11.8% rise in revenue and a 0.3% increase in operating profit from a year earlier. The figures exceed the market consensus of 1.34 trillion won in revenue and 589.7 billion won in operating profit by 5.1% and 7.7%, respectively.
The decline in the won-dollar exchange rate weighed on third-quarter results. The average rate stood at about 1,424 won per dollar, roughly 5% lower than in the second quarter. Revenue losses from a general strike in May were also reflected in the quarter. Even so, analysts attribute the expected outperformance to the rapid ramp-up at Plant 5.
At Plant 5, the cost ratio and selling and administrative expenses rose noticeably from the previous quarter beginning in the second quarter of this year. Analysts read that as a sign that process performance qualification (PPQ) batches are increasing in earnest. PPQ batches are a procedure to verify that a drug manufacturing facility and its processes are suitable for actual commercial production. If production continues at the current pace, brokerages said Plant 5 will begin contributing meaningfully to profit from 2027, when PPQ batches convert to commercial output.
The company's plant in Rockville, Maryland, is running at around breakeven, with utilization estimated at about 50%. Because technology transfer and test production are required even after contracts with new clients are signed, the facility is not expected to contribute substantially to revenue and profit until 2028. At full capacity, the plant could generate more than 500 billion won ($352 million) in annual revenue.
The prolonged labor dispute remains a risk. Samsung Biologics and its union failed to reach an agreement in a third round of post-arbitration mediation held on the 1st. The union has given notice of a three-week general strike starting on the 26th. While small orders continue to come in, brokerages noted that stable production capacity is critical for large, long-term supply contracts, meaning a drawn-out dispute could hamper efforts to win new clients.
On the positive side, easing policy uncertainty over U.S. pharmaceutical tariffs and most-favored-nation (MFN) pricing has revived discussions with customers. If the labor dispute is resolved early, analysts said it could lead to large, long-term supply contracts.
The possibility of breaking ground on a sixth plant is another key variable for future growth. In a prospectus for its rights offering, Samsung Biologics outlined plans to execute investment related to Plant 6 within this year. The company said the investment is intended to get ahead of future demand, given the considerable time required to add capacity. Brokerages said that if Samsung Biologics formally commits to building Plant 6, it would suggest Plant 5 has already secured a substantial volume of orders.
Hana Securities cut its target price for Samsung Biologics to 1.95 million won from 2.03 million won, reflecting share dilution from the rights offering. It estimated the company's fair value at 94.5 trillion won, little changed from its previous 94.8 trillion won.
