The author is an analyst of NH Investment & Securities. He can be reached at [email protected]. — Ed.


Despite a slowdown in the HFF market, From Bio’s major products Boswellia and Mastic are faring well. While the company’s sales have shrunk y-y, its margins are sound thanks to a reduced home shopping sales portion and decreased ad costs. Although uncertainties surrounding its new cosmetics business linger, expectations remain valid for the use of its existing mastic gum pipeline for various applications.

Remains in the black despite slowdown in HFF market

From Bio is enjoying sound margins, despite a slowdown in the health functional food (HFF) market. The company remains in the black thanks to stable sales, a reduced home shopping sales portion, and decreased ad costs (eg, PPL). The solid performance is attributed to high repeat purchase rates for its Boswellia and Mastic products from diverse age groups. In 3Q22, From Bio recorded healthy earnings thanks to inventory buildup at overseas distributors.

Though the firm’s two main products have seen sound results, its heavy reliance on these products is also viewed as a weakness. That said, we expect related market concerns to ease gradually from 2023, as: 1) the company plans to launch new HFF products made of individually-approved ingredients; and 2) its subsidiary From Bio Cosmetics also plans to roll out new products. In addition, with clinical trials on new cosmetics products for alopecia to be completed by end-2022 (patent registered using its individually-approved ingredient mastic gum), related sales should emerge from 2023.

− That said, the extent of OP improvement will likely remain somewhat limited till 2023, given marketing expense expansion to enhance brand awareness for subsidiary From Bio Cosmetics. In our view, From Bio’s long-term strategic direction towards: 1) cutting sales portions for low-margin distribution channels; 2) maintaining strong R&D capabilities for individually-approved ingredients; and 3) internalizing production of main products through capacity expansion bode well for long-term margin improvement.

2022 earnings to come in sluggish; earnings to improve next year on product roll-out effects

We forecast tepid 2022 results, including sales of W104.0bn (-23.0% y-y) and OP of W7.0bn (-38.7% y-y). That said, given sluggish domestic HFF market conditions, the firm appears to have performed relatively soundly. While the company’s 2022E P/E of 22.8x appears somewhat lofty, we need to consider high P/E levels across the sector, due to recent lackluster earnings.



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