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The worst is over

Company overview

A pharmaceutical holding company with a long history

• Chong Kun Dang Holdings (CKD Holdings) was established in 2013 through the spin-off of Chong Kun Dang.

• Among the company’s eight first-tier subsidiaries, Chong Kun Dang, Kyung-Bo Pharmaceuticals, and CKD Bio are publicly traded.

• CKD Healthcare is an unlisted company that is well-known for its probiotic brand Lacto-Fit, which was launched in 2016.

• CKD Holdings’ revenue growth is largely tied to that of CKD Healthcare.


Investment points

Swinging to profit on the back of product/channel mix improvements

• Shifts in consumer behavior have led to favorable changes in the revenue mix of health supplements.

• We expect sales of more profitable premium products (e.g., Lacto-Fit Solution, I’m Vita, etc.) to grow.

• In 1Q23, the vitamin category saw revenue surge 109% YoY, driven by premium products (I’m Vita).

• The channel mix is also improving. In particular, the contribution of the online channel should continue to increase, boosting operating profit (by reducing commissions paid to home shopping channels).


Recommendation

Initiate coverage with Buy rating and TP of W63,000

• We initiate our coverage on CKD Holdings with a target price of W63,000, which is based on our calculation of the company’s NAV.

• For 2023, we forecast CKD Holdings to post revenue of W899.2bn and operating profit of W23.4bn.

• For 2023, we forecast CKD Healthcare to post revenue of W492.2bn and operating profit of W35.9bn.