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An inevitable valuation reset

3Q25 review: Below-consensus revenue, in-line OP

For 3Q25, PharmaResearch reported revenue of W135.4bn (+52% YoY), missing the consensus. By division, revenue was W22bn for pharma (+36% YoY; +33% YoY in Korea and +42% YoY overseas), W76.7bn for medical devices (+51% YoY; +59% YoY in Korea and +34% YoY overseas), and W35.2bn for cosmetics (+108% YoY; +126% YoY in Korea and +99% YoY overseas).

Operating profit was W61.9bn (+77% YoY; OP margin of 45.7%), in line with the consensus. We estimate adjusted EBITDA came in at W66.2bn (+67% YoY; adjusted EBITDA margin of 48.9%).

Lower TP to W700,000, but maintain Buy

We lower our target price on PharmaResearch to W700,000 (from W820,000), as we revised down our target multiple from 35x (the stock’s two-year peak P/E) to 31x (the average EV/EBITDA of global peers during their rally periods). With our target price still implying 59% upside, we maintain our Buy rating.

The stock fell 9% following the 3Q25 earnings release. Although market expectations had already been lowered, it appears that weaker-than-expected 3Q25 revenue further weighed on sentiment. In the domestic market, procedure capacity at private dermatology clinics declined temporarily following the return of resident doctors to their teaching hospitals. On the export side, the company’s internal control measures aimed at curbing unauthorized shipments likely had an impact. However, capacity is normalizing as clinics hire additional physicians, and the export policy (which has been implemented in the past) should help to improve overall export quality. In 4Q25, earnings should be further supported by visa-free entry for Chinese tourists and initial shipments to Vivacy, the company’s new European partner. All in all, we see no reason for excessive concern.

Following the pullback, the stock is trading at a 12-month forward P/E of 22x. Given the high base created by robust earnings this year, a valuation reset was likely inevitable heading into 2026. It is encouraging that the valuation burden has eased, allowing the focus to shift to 2026 growth prospects. For 2026, we expect the firm to deliver revenue of W701.4bn (+26% YoY), adjusted EBITDA of W319.9bn (+28% YoY; adjusted EBITDA margin of 45.6%), and operating profit of W301.3bn (+30% YoY; OP margin of 43%). That said, with 4Q25 earnings improvement becoming more important, we view October medical/aesthetic tourist spending data as a key indicator to watch.