Chong Kun Dang posted higher sales in the second quarter of this year, but its operating profit fell 10% from a year earlier. While strong sales of in-licensed products drove top-line growth, mounting cost pressures squeezed overall profitability, pulling the pharmaceutical company’s operating margin down from 5.2% to 4.2%.
According to a standalone regulatory filing on the Electronic Disclosure System on July 31, Chong Kun Dang reported second-quarter revenue of 475.4 billion won and an operating profit of 19.9 billion won. Compared with the same period last year—when the company recorded 429.6 billion won in revenue and 22.2 billion won in operating profit—revenue rose 10.7%, while operating profit dropped 10.1%.
The results align with earlier forecasts from securities firms, which projected that sales of in-licensed drugs would expand top-line revenue while higher cost burdens associated with merchandise sales would weigh on overall profitability.
Rising Cost Ratios Drag Down Profitability
Analyzing the company's Q2 performance, iM Securities noted, "While sales remain stable, operating profit is proving unstable." The brokerage added, "Solid growth in in-licensed products such as Godex, Pexuclu, and notably Wegovy is expanding the top line, but a rising cost ratio is driving negative growth in operating profit." Citing the decline in profitability, iM Securities previously lowered its target price for Chong Kun Dang from 120,000 won to 90,000 won.
Kiwoom Securities echoed a similar outlook, stating, "Results are expected to be decent, but likely to come in slightly below market expectations." The firm highlighted that "the company's cost ratio is expected to remain above 70% due to cost burdens stemming from increased merchandise sales."
