Samsung Biologics (207940): HSBC initiates Samsung Biologics at Buy, arguing that order recovery and new capacity can overcome current investor concerns

Overview

HSBC initiates coverage of Samsung Biologics with a Buy rating. The report argues that the market has overreacted to slower first-half orders, labor disputes and tariff uncertainty, while overlooking structural CDMO growth, the company's scale and margins, and sales contributions expected from new Korean and US capacity.

Core views

Samsung Biologics entered the report with a sharp performance gap: its shares were down 17% in 2026 year-to-date while the KOSPI had risen 59%. HSBC attributes the weakness to three concerns—slowing orders, strikes and wage negotiations, and US tariffs—but argues these concerns are overdone. Following the November 2025 spin-off of Samsung Bioepis, Samsung Biologics is a pure-play CDMO company. The combined market capitalization of Samsung Biologics and Samsung Epis Holdings was KRW73.4trn on 16 September 2026, below Samsung Biologics' pre-spin-off market capitalization of KRW86.9trn. HSBC expects improving second-half earnings to support a recovery. The structural industry backdrop is the first pillar of the thesis. HSBC forecasts the global CRDMO market to expand from USD159bn in 2023 to USD282bn in 2028, a 12.2% CAGR, while the CDMO portion is expected to grow at 15.6%. Outsourcing penetration is expected to rise from 38% in 2023 to 50% in 2028 as pharmaceutical and biotechnology companies seek lower-cost, more efficient development and manufacturing and as smaller drug developers rely more heavily on external capacity. Against this backdrop, HSBC forecasts Samsung Biologics' sales to grow at an 18.1% CAGR in 2025-28, faster than its cited 14.7% growth in 2024-26. The second pillar is operating competitiveness. Samsung Biologics reported a 45.4% operating margin in 2025, compared with 33.4% for WuXi Biologics, 19.0% for Lonza and 10.3% for Fujifilm. HSBC attributes the difference to economies of scale, relatively low Korean labor costs, an antibody-centered portfolio and the ExellenS manufacturing framework. The company had 845kL of CDMO capacity, versus 780kL for Lonza, 430kL for WuXi Biologics and 400kL for Fujifilm. ExellenS standardizes processes across facilities to improve plant equivalency, regulatory preparation, speed to market, dual sourcing and multi-plant production while reducing manufacturing inefficiencies. HSBC views the first-half order slowdown mainly as a lagged effect of fewer client discussions in the first half of 2025, when tariff uncertainty discouraged commitments. CDMO contracts usually require about 12 months for technology transfer, pilot production and process-performance qualification, so weaker discussions appeared later as weaker orders. HSBC expects momentum to improve from the second half of 2026 as Plant No. 5 and the US facility become operational. It forecasts USD3bn of new orders in 2026, including USD0.8bn booked year-to-date at the time of the report, and USD6-7bn in 2027-28, compared with USD4.3bn in 2025. The report also notes that cumulative CMO orders historically had a 0.8 correlation with the share price, reinforcing order momentum as a key operating and valuation indicator. US policy is presented as increasingly manageable and potentially supportive. The US accounts for approximately 40% of Samsung Biologics' sales. An April 2026 Section 232 proclamation imposed a 100% tariff on patented pharmaceutical and ingredient imports, with lower rates for qualifying onshoring plans and a potential 0% rate through 20 January 2029 for companies combining qualifying commitments with most-favored-nation pricing agreements. HSBC believes Samsung Biologics' acquired US manufacturing capacity improves its position under this framework. Separately, the Biosecure Act was signed into law in December 2025 but still requires publication of the biotechnology companies of concern list, implementation guidance and revision of federal procurement rules. HSBC argues that diversification away from Chinese CDMOs could benefit Korean providers with US manufacturing sites, including Samsung Biologics. The Rockville acquisition provides the onshore platform. In March 2026, Samsung Biologics acquired 100% of Human Genome Sciences from GSK for USD353m, comprising USD280m for the plant and USD73m for inventory and spare parts. The company retained about 500 employees. The Maryland plant has 60kL of capacity, room for expansion and a potential path to 100kL. Commercial production has begun, and revenue recognition is expected from the third quarter of 2026. Together with Plant No. 5, the facility is expected to offset the effect of May's strike and support second-half sales. HSBC forecasts sales and operating-profit CAGRs of approximately 18% and 19% over 2025-28. Its sales estimates are 1-6% above consensus and operating-profit estimates are 3-6% above consensus for 2026-28. For 2026 specifically, the company guided to 15-20% sales growth, but HSBC forecasts 22%. The report assumes a KRW150bn sales impact from the May strike in the third quarter, offset by incremental output from Plant No. 5 and Rockville. Its third-quarter estimates are broadly in line with consensus, while its fourth-quarter estimates are higher: fourth-quarter sales are forecast at KRW1,634.7bn versus consensus of KRW1,490.3bn, and operating profit at KRW741.8bn versus KRW719.6bn. Full-year revenue is forecast to rise from KRW4,557.0bn in 2025 to KRW5,574.8bn in 2026, KRW6,561.0bn in 2027 and KRW7,507.3bn in 2028; operating profit is forecast at KRW2,509.1bn, KRW2,998.9bn and KRW3,484.0bn for 2026-28. Foreign exchange creates both near-term earnings support and a downside risk. Company guidance assumed KRW1,400 per USD, while the average rate was KRW1,484 in the first half of 2026 and KRW1,497 in July-August; HSBC's end-2026 assumption is KRW1,320. The weaker-than-assumed won through much of the year supports HSBC's above-guidance sales view, but a stronger won remains material because more than 90% of 2025 sales were generated overseas. The report tests labor-cost concerns through explicit scenarios. In the base case, salaries and employee benefits rise 14-22% year-on-year during 2026-28, producing 2027 operating profit of KRW2,999bn and EBITDA of KRW3,468bn. A scenario with salary increases 10% below the base produces KRW3,128bn of 2027 operating profit and a KRW2,130,000 fair value. A 10% increase above the base lowers 2027 operating profit to KRW2,858bn and produces KRW2,000,000 of fair value. In the most bearish case, salaries rise a further 20% above the base, lowering 2027 operating profit to KRW2,706bn and 2026-28 EBITDA by roughly 4-14%; applying a reduced 23.4x EV/EBITDA multiple still yields a KRW1,600,000 scenario value. HSBC therefore concludes that labor costs alone have limited valuation downside. Sales and order momentum carry more risk than wages in HSBC's scenario work. The base case assumes 14-22% annual sales growth during 2026-28 and produces the KRW2,100,000 valuation. A bull case with sales growth of 19-27% produces 2027 operating profit of KRW3,557bn, EBITDA 7-25% above the base across 2026-28 and a KRW2,400,000 fair value. A downside case with growth of 9-17% produces 2027 operating profit of KRW2,463bn and a KRW1,700,000 fair value. The most bearish 4-12% growth case produces 2027 operating profit of about KRW1,951bn, EBITDA of KRW2,420bn and a KRW1,200,000 fair value using a lower 23.4x multiple. This leads HSBC to identify sustained order conversion, rather than wage inflation, as the more important determinant of downside. The proposed PolyPeptide acquisition adds an option not included in HSBC's forecasts. PolyPeptide operates six cGMP sites in five countries and has worked on more than 1,000 peptide projects. Samsung Biologics is seeking 100% ownership for approximately KRW2.7trn by the end of 2026. The transaction would diversify its antibody-heavy portfolio toward peptide and GLP-1 manufacturing. The overall peptide market is projected to grow from USD52.5bn in 2025 to USD83.7bn in 2034, a 5.3% CAGR, while the peptide CDMO market is forecast to rise from USD5.1bn to USD28.6bn at a 21.1% CAGR. Because approvals remain pending, HSBC has not included the acquisition in its earnings estimates. Funding plans are reflected separately. Samsung Biologics announced a KRW3trn capital increase, allocating KRW2.7trn to PolyPeptide and KRW0.3trn to a second Korean bio campus. It plans to issue 2.27m shares, equivalent to 4.9% of existing shares, with listing scheduled for 30 November 2026. HSBC includes the capital increase in its valuation estimates even though it excludes PolyPeptide's operating contribution. HSBC values Samsung Biologics at 28.2x 2027e EV/EBITDA, the average of its 2024-26 historical valuation band. Applying that multiple to 2027 EBITDA of KRW3,468.2bn produces enterprise value of KRW97,804.2bn and equity value of KRW99,991.6bn after including forecast net cash. The resulting value per share is KRW2,059,094, rounded to a KRW2,100,000 target. This equates to 44x 2027e earnings, versus the stock's 30-70x PE range over the previous two years. Against the KRW1,409,000 share price on 16 September 2026, the target implies 49.0% upside and supports HSBC's Buy initiation. The report also reviews sustainability as part of long-term competitiveness in global pharmaceutical supply chains. Samsung Biologics targets a 59% reduction in Scope 1 and 2 emissions by 2034 versus 2023, RE100 and net zero by 2050, and a 40% water-reuse rate by 2030. It also targets approximately 45% female employees, 18% female executives and 38% female managers by 2040. HSBC presents these initiatives as relevant because global pharmaceutical clients increasingly assess ESG risks throughout their supplier networks.

Analysis framework

HSBC begins with the stock's underperformance and the market's three main concerns, then tests each concern against contract timing, policy changes, capacity additions and scenario analysis. It compares Samsung Biologics' growth, margins and capacity with global peers, builds 2026-28 operating forecasts, stress-tests salary and sales-growth assumptions, and applies a historical EV/EBITDA multiple to 2027 estimated EBITDA. It separately examines strategic acquisitions, financing and sustainability without including unapproved PolyPeptide earnings in the base forecast.

Methodology notes

• Valuation methodsEV/EBITDA valuation

  Historical-band EV/EBITDA valuation

  HSBC applies a 28.2x target multiple, equal to the average of Samsung Biologics' 2024-26 historical band, to its 2027 EBITDA estimate. More bearish scenarios use 23.4x, the average low end of that band.

• Corporate Fundamentals and Finance

  Salary and sales-growth scenario analysis

  The report changes salary inflation and sales-growth assumptions to measure their effects on operating profit, EBITDA and valuation. This shows that valuation is more sensitive to sustained order-driven sales growth than to the modeled wage increases.

• Competition & strategyEconomies of Scale and Learning Curve

  Scale and standardized-manufacturing advantage

  HSBC links Samsung Biologics' industry-leading capacity and ExellenS standardization to lower unit costs, faster regulatory preparation, production consistency and margins above global peers.

• Industry AnalysisSupply-demand framework

  CDMO market growth and outsourcing penetration

  The report estimates industry growth from pharmaceutical R&D demand, a larger drug pipeline and rising outsourcing penetration, then compares Samsung Biologics' expected sales growth with the broader market.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Samsung Biologics (207940.KS)

  Primary covered company and pure-play CDMO beneficiary of outsourcing growth, new capacity and potential order recovery.

  Strengths

  845kL capacity, 45.4% 2025 operating margin, ExellenS standardization, relatively low labor costs and new US manufacturing capacity.

  Weaknesses

  Near-term order softness, labor negotiations, high overseas-sales exposure and dependence on timely ramp-up of new sites.

  Comparison

  Its 2025 operating margin exceeded the cited margins of WuXi Biologics, Lonza and Fujifilm, while HSBC expects its sales growth to outpace the CDMO market.

  Risks

  A stronger KRW, delays at Plant No. 5 or Rockville, and persistently weak orders.

• PolyPeptide Group

  Proposed acquisition target that would expand Samsung Biologics into peptide and GLP-1-related CDMO services.

  Strengths

  Six cGMP sites in five countries and experience across more than 1,000 peptide projects.

  Weaknesses

  The transaction still requires approval and its earnings are not included in HSBC's forecasts.

  Comparison

  The peptide CDMO market is forecast to grow faster than the overall peptide market.

  Risks

  Approval, completion and integration uncertainty.

• Samsung Epis Holdings (0126Z0.KS)

  The separately listed holding company created through the Samsung Bioepis spin-off; its separation made Samsung Biologics a pure-play CDMO company.

  Strengths

  Focuses on biosimilars and can increase dedicated R&D investment following the separation.

  Weaknesses

  The expected post-spin-off rerating had not materialized by the report date.

  Comparison

  It represents the biosimilar business separated from Samsung Biologics' CDMO operations.

• WuXi Biologics (2269 HK)

  Global CDMO comparable and competitor used in margin and capacity analysis.

  Strengths

  430kL capacity and a 33.4% operating margin in the report's comparison.

  Weaknesses

  Chinese CDMO exposure may be affected by US procurement restrictions and customer diversification.

  Comparison

  Samsung Biologics had greater capacity and a higher 2025 operating margin.

  Risks

  Potential inclusion in policy-driven customer diversification away from Chinese providers.

Key data

• Rating and target priceBuy; KRW2,100,000Initiation of coverage
• Share price and implied upsideKRW1,409,000; +49.0%Share price as of 16 Sep 2026
• 2026 year-to-date performanceSamsung Biologics -17%; KOSPI +59%Performance gap cited as evidence of market concern
• 2026 sales growth22%HSBC forecast versus company guidance of 15-20%
• 2025-28 growth forecastsSales CAGR 18%; operating-profit CAGR 19%HSBC estimates
• New-order forecastUSD3bn in 2026e; USD6-7bn in 2027-28eVersus USD4.3bn in 2025 and USD0.8bn booked year-to-date
• 2025 operating margin45.4%Versus WuXi Biologics 33.4%, Lonza 19.0% and Fujifilm 10.3%
• CDMO capacity845kLVersus Lonza 780kL, WuXi Biologics 430kL and Fujifilm 400kL
• Global CRDMO marketUSD159bn in 2023 to USD282bn in 2028e12.2% CAGR
• CDMO market growth15.6% CAGR in 2023-28eFaster than the broader CRDMO market
• Rockville facilityUSD353m acquisition; 60kL capacityRevenue expected from 3Q26; potential expansion to 100kL
• PolyPeptide transactionApproximately KRW2.7trnTargeting 100% ownership by end-2026; earnings not included in HSBC forecasts
• Capital increaseKRW3trn and 2.27m new sharesNew shares equal 4.9% of existing shares; planned listing on 30 Nov 2026
• Base 2027 estimatesOperating profit KRW2,998.9bn; EBITDA KRW3,468.2bnInputs to the central valuation case
• Target valuation28.2x 2027e EV/EBITDA; 44x 2027e PEEV/EBITDA multiple is the average of the 2024-26 historical band

Impact & implications

HSBC expects the combination of structural outsourcing growth, above-peer margins, new Korean and US capacity, and a second-half order recovery to lift Samsung Biologics' earnings above its guidance and consensus. Its scenario work indicates that modeled wage increases alone leave valuation above the report-date share price, while a sustained failure to convert orders into sales creates the larger downside. US onshoring and the Biosecure Act could improve the company's competitive position, while PolyPeptide could add faster-growing peptide exposure if the transaction is approved.

Risks

• A stronger Korean won against the US dollar could reduce translated sales and earnings because more than 90% of 2025 sales were generated overseas.
• Sales contributions from Plant No. 5 or the Rockville facility could be delayed.
• New-order momentum could remain weak, including if tariffs or wider protectionism disrupt customer commitments.

What to watch

• The pace of new-order recovery from the second half of 2026 and progress toward HSBC's USD3bn 2026 forecast.
• Third- and fourth-quarter sales contributions from Plant No. 5 and the Rockville facility.
• The outcome of wage and bonus negotiations with the Samsung Biologics labor union.
• Publication of the Biosecure Act's BCC list, subsequent implementation guidance and revisions to federal procurement rules.
• Regulatory approval and completion of the PolyPeptide acquisition by the end of 2026.
• The KRW/USD exchange rate relative to company guidance of KRW1,400 and HSBC's KRW1,320 end-2026 assumption.
• Completion and listing of the capital-increase shares planned for 30 November 2026.