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Global leadership in skin boosters is within reach

Initiate coverage with Buy rating and TP of W260,000

We initiate our coverage on PharmaResearch with a Buy recommendation and target price of W260,000 (43% upside). In deriving our target price, we applied a P/E of 23.1x, the stock’s historical peak multiple. For 2024, we forecast revenue at W335.3bn (+28% YoY) and operating profit at W124.5bn (+35% YoY; OP margin of 37.1%). The stock is currently trading at 12-month forward P/E of 17x, higher than its three-year average (14x) but in line with the global peer average (17x).

Investment points

1) Reshaping the skin booster industry with Rejuran: The skin booster market has traditionally been dominated by polylactic acid dermal fillers, but PharmaResearch’s Rejuran offers a different approach based on polynucleotide (PN) injections. Rejuran has become the fastest-growing injectable treatment in the domestic market, expanding at a CAGR of 54% over the past four years. Its annual revenue (domestic + overseas) has reached roughly W110bn, quickly closing the gap with Galderma''s Sculptra, currently the world’s most popular skin booster (2023 revenue: US$100mn). We expect Rejuran to drive display growth going forward, considering its growing overseas presence and status as a pioneering therapy (which allows it to stand out from competitors and maintain a strong brand identity).

2) Cosmetics business growth: The cosmetics business is also growing strongly, as the increasing popularity of Rejuran is supporting bundled product sales. Indeed, the revenue mix of cosmetics jumped from 9% in 2018 to 24% in 2H24. We see cosmetics business growth continuing as Rejuran expands into new overseas markets.

3) Business diversification via M&As: The company has been pursuing M&As to diversify its business portfolio (fillers, botulinum toxin, aesthetic devices, etc.). Notably, the botulinum toxin business generated revenue of W20bn in 2023, just five years after it was acquired (2018). Just as the cosmetics business is benefiting from the popularity of Rejuran, we expect the firm’s diverse portfolio to create synergies (product bundling, etc.). The company held cash/cash equivalents of roughly W206bn as of end-2Q24 and generates free cash flow of roughly W13bn (12-quarter average). Backed by its strong financial position, we expect the company to seek more M&A opportunities.