Risk Reward Update

Research evidence excerpt

Risk Reward Update

UpdateM

RiskRisk RewardReward– Yuhan-Corp.Yuhan(000100.KS)Corp. (000100.KS)

Lazertinib value priced in; weak earnings power is a drag

PRICE TARGET W97,000 EQUAL-WEIGHT THESIS

Base case, derived from a DCF model to best capture the company's sustainable growth over ▪We assume lazertinib global sales reach

the longer term. We assume a 7.8% cost of equity (beta 0.8, risk-free rate 3.0%, risk premium US$2bn in 2030.

6.0%) and 5.0% terminal growth rate and FCF growth. We believe the 3.0% growth rate is ▪We expect active pharmaceutical

reasonable given an aging population, increase in medicine use, and Yuhan's good R&D ingredient (API) exports to be another

capability (vs. its peers). growth driver as Yuhan's key client Gilead

Science's (covered by Terence Flynn) HIV W129,071

drug (lenacapavir) should reach US$6bn in

Consensus Price Target Distribution W81,000.00 W160,000.00 sales in 2030, we estimate. We assume MS PT

Yuhan API exports related to lenecapavirSource: Refinitiv, Morgan Stanley Research Mean Morgan Stanley Estimates

will reach US$220mn in 2030, given that

API price is usually <10% of a drug price, and

at least two vendors supply the same API

RISK REWARD CHART for stable supply.

▪Despite the two growth drivers, Yuhan's

earnings have been weak, which is

KRW

W218,000W218,000(+205.75%)W218,000(+205.75%)(+205.75%) discouraging. While the two growth drivers

are well priced in the share price, we haven't

200000 seen meaningful/promising new drug

developments yet.

150000 Consensus Rating Distribution

79% Overweight

100000 W97,000W97,000(+36.04%)W97,000(+36.04%)(+36.04%) 11% Equal-weight

W71,300W71,300W71,300 11% Underweight

50000 MS Rating

W49,000W49,000(-31.28%)W49,000(-31.28%)(-31.28%) Source: Refinitiv, Morgan Stanley Research