← back to picks

KOSPI A069620 · 069620.KS Reporting KRW (₩M) Control Daewoong Co. 52.3% · Yoon family Valuation 2026-05-31 Damodaran FCFF · 1000-iter MC FCFF · Dark v3

Governance-discounted Korean pharma, modest cushion · +9.5% margin of safety

Price sits inside the MC band — P(below) = 29%

Intrinsic value ₩144,353/share (after a 25% governance discount; pre-haircut ₩192,471) vs market ₩130,600. The cushion is real but thin — the Monte Carlo p5 tail (₩112,064) sits ~14% below today's price, and 29% of 1,000 correlated draws land under the market.

SectorDrugs (Pharmaceutical) · KoreaCountry mixKR 87% · US 6% · BR/CN/UAE tailβ / MC σ1.41 levered · ±₩17.6k/sh (1000 runs)GovernanceHoldco + family control · 25% haircutQualityROIC ~13% terminal ≈ WACC · synth AaaDrawdown−34% from 52w high ₩199,400

Intrinsic / share

₩144,353.31

post 25% gov · pre ₩192471.08

Market / share

₩130,600.00

~29 May 2026 close · KOSPI

Margin of safety

+10.5%

vs intrinsic

Enterprise value

₩3.00T

77.3% terminal

Cost of equity / debt

10.55% / 2.98%

β 1.40 · CRP 0.68%

Terminal ROIC / g

12.92% / 3.50%

spread ~506bp (ROIC 12.92% vs WACC 7.86%)

What it sells, where it sells

Operating segments

Domestic ETC + OTCPrescription & over-the-counter drugs sold into the price-controlled Korean NHI market~70%

Nabota (botulinum toxin)~84% exported — US via Evolus/Jeuveau, plus GCC, LatAm, China; the only material global line~16%

New drugs + digitalFexuclue P-CAB, Envlo SGLT-2, ThynC digital health — the proprietary growth engines~14%

The single-segment model is deliberate: the corpus gives product-level revenue but not a clean multi-year per-line margin/capital split, so a sum-of-parts would invent precision the evidence does not support. The blended ~6% grower with a Nabota-led mix re-rating is what is actually modelled.

Country mix (revenue-weighted CRP input)

🇰🇷South Korea87%

🇺🇸United States6%

🇦🇪United Arab Emirates2%

🇧🇷Brazil2%

🇨🇳China2%

🇪🇸Spain1%

Korea is Aa2 — the same investment-grade tier as the US — so the weighted CRP add-on is thin (0.68%); the Brazil (Ba1) and China tail carry almost all of the small uplift over Korea's standalone country premium.

Background — five things to know before the case

Context the share price doesn't carry on its face. Skim this once and the bull / bear bullets below stop reading as inside baseball.

Holdco- and family-controlled operating company. Daewoong Co. (003090) holds 52.29% of the listed opco and is itself controlled by the founding Yoon family (≈38% via the chairman and related parties). Minority holders sit two layers below control.
Genuine global franchise, not commodity generics. Nabota is an FDA-approved botulinum toxin (sold as Jeuveau via Evolus, ~14% US aesthetic share, ~84% exported); Fexuclue (Korea's 34th new drug) and Envlo (36th) are own-developed molecules. Operating margin expanded from ~7.5% (2021) to 12.5% (2025) on this richer mix.
Q1-2026 profit slump was self-inflicted and temporary. Revenue +6% YoY but operating profit −42.6% on a one-off ETC distribution channel overhaul (10-region block-wholesale switch, inventory returns/fee true-ups, an Olmetec raw-material issue). Real prescription volume held; brokers model recovery from 2H26.
Five years of failed minority returns. Negative total shareholder return each of the last five fiscal years, persistent share-count dilution (no buybacks), a frozen ₩600 token dividend (~0.35% yield), and FCF that turned negative −₩103.7bn in FY2024.
Related-party leakage into ~17 family vehicles. Profitable adjacencies (derma cosmetics via DN Cosmetics, pharma e-commerce via M-Circle/ThePyeonhanShop) are housed in private family firms with asymmetric intra-group billing; the holdco's ~29.7% treasury stake — highest among pharma peers — entrenches control.

Where we diverge from the sector

Each row asks: if we'd used the sector median for this one assumption instead of our override, how much would the share price change? Negative = our override is more conservative (worth less); positive = more aggressive (worth more). Skim down the rightmost column to see which bets are doing the work.

Assumption

Our input

Sector median

Value impact

01Revenue growth10-year revenue CAGR off the clean FY2025 base

~6% CAGR₩1.57T → ₩2.83T by Y10 — straight-line extrapolation of a documented decade, not a regime change

~5% CAGRDrugs (Pharmaceutical), global mature cross-section

+₩10k

02Operating marginTerminal EBIT margin vs the contaminated TTM trough

13.5%Low-to-mid teens; ramps off the clean FY2025 12.45%, NOT the channel-overhaul TTM 11.2%

20%+Pure aesthetics-toxin peers — rejected at this regulated-price, royalty-encumbered mix

−₩14k

03Sales-to-capitalReinvestment efficiency, capex-up build-out phase

1.1× → 1.3×Capital-heavy through the Nabota 3rd-plant build, easing as it fills Y6-10

1.11×Drugs (Pharmaceutical) industry median — structurally capital-heavy

≈₩0

04Terminal growthYear 10+ steady state vs KRW risk-free ceiling

3.50%Pinned just below the KRW risk-free 3.65% per the Damodaran hard ceiling

3.65%KRW risk-free (Korea 10Y ~4.05% − 0.42% sovereign spread)

−₩2k

05Cost of capital10y WACC vs WACC implied by the suppressed regression β

7.86%β 1.41 (Damodaran-global Drugs β_u 0.999 re-levered at D/E 0.55) · CRP 0.68% · rf 3.65%

~5%Suppressed 5Y regression β 0.07 (unanimous Yahoo/SA/SWS) — rejected as the thin-float, family-control suppressed-beta trap

−₩30k

Net effect of overrides

The single most consequential override is rejecting the suppressed 0.07 regression β in favour of the Damodaran-global re-levered 1.41 — a thin-float, ~70% family-controlled stock barely co-moves with the KOSPI, so its regression β is an artefact, not a risk measure. Pinning the sector-anchored β raises WACC to 7.86% and is by far the largest haircut to value, before the separate 25% governance discount even applies.

−₩36k

Our override Sector / regression default Override adds value Override subtracts value

The story & the five claims

The 10-year story this DCF is built on, plus the five anchor claims that translate the story into engine inputs.

The 10-year story

Daewoong is a steady ~6% top-line grower whose operating margin re-rated from ~7.5% in 2021 to ~12.5% in 2025 as proprietary products — Nabota botulinum toxin, the Fexuclue P-CAB, and the Envlo SGLT-2 — displaced low-margin distributed and generic revenue. The base case is not a re-rating to aesthetics-peer economics; it is straight-line extrapolation of a documented decade. Revenue compounds ~6% off the clean FY2025 base to roughly ₩2.83 trillion by year 10, operating margin normalizes off the channel-overhaul-depressed TTM back to ~12.5% and grinds to a 13.5% terminal, reinvestment stays capital-heavy (sales-to-capital 1.1 rising to 1.3 as the Nabota plant fills), and terminal returns land just above a ~10-11% Korean cost of capital. This is a narrow, Nabota-dependent franchise that earns roughly its cost of capital, not a high-ROIC compounder — and the governance discount is handled as a separate, deliberate post-DCF haircut.

Two debates worth pressure-testing

Should the suppressed 0.07 regression β be trusted?

Our view: No — three sources (Yahoo, StockAnalysis, SimplyWallSt) all print 0.07, but that is the suppressed-beta trap: a thin float (~47%), ~70% family/holdco control, and a stock that barely co-moves with the KOSPI. We pin the Damodaran-global Drugs β_u 0.999, re-levered at D/E 0.55 to a levered β of 1.41. That raises WACC to 7.86% and is the single biggest drag on value — but it is the right risk measure for a franchise this volatile.

Is a 25% governance discount too harsh for an improving opco?

Our view: The context check proposed 0.20; the LLM Council flagged that as too soft given run-rate, scaling related-party leakage into ~17 family firms and a five-year record of negative minority returns. We settled on 0.25 — above the 0.20 base, below the council's ~0.30 — crediting the worsening tunneling read while still pricing some Korea "value-up" treasury-cancellation upside.

CLAIM 01Revenue compounds ~6% to ≈₩2.83T by year 10.revenue_year_10: ₩2,830,000M · ₩1.57T → ₩2.83TStraight-line extrapolation of a ~6.5% decade CAGR with a clean 2021-25 re-acceleration; NHI price cuts cap the domestic line but Nabota exports and new-drug ramps offset.

CLAIM 02Operating margin normalizes to ~12.5% and grinds to 13.5% terminal.target_op_margin: 13.5% · base 12.45%Mix-led expansion is durable but capped by regulated NHI pricing and Nabota's Evolus-shared, Medytox-royalty-burdened US economics. 20%+ aesthetics-peer margins rejected, not parked.

CLAIM 03Capital-heavy reinvestment at industry-median efficiency.S2C: 1.1× Y1-5 · 1.3× Y6-10Active capex-up, debt-funded phase (₩100B 3rd Nabota plant, D/E 0.47→0.73); anchored to the Damodaran 1.11 median, easing as the plant fills.

CLAIM 04Growth and margin converge over the full decade.year_of_convergence: 10A mature mid-cap mid-way through a mix-shift re-rating, not a young-growth name; the proprietary engines still have a multi-year scaling runway before the franchise matures.

CLAIM 05Terminal g 3.5%, small failure tail, ROC ≈ WACC.terminal_g: 3.50% · failure: 2% · gov haircut: 25%Going concern; implied terminal ROC ~12.9% sits just above the ~10-11% Korean cost of capital — earns roughly its cost of capital. 2% failure tail for Medytox strain-surrender risk.

Where we diverge from sell-side

We reject the suppressed regression β; sell-side anchors elsewhere. The unanimous 0.07 5Y regression β would imply a ~5% WACC and a far higher value. We pin the Damodaran-global Drugs β_u 0.999 re-levered to 1.41 (WACC 7.86%), treating the suppressed β as a thin-float / family-control artefact.
Margin capped at 13.5%, not aesthetics-peer 20%+. The bull "Nabota/Fexuclue go global blockbuster" case lives in the scenarios, not the base — the realized Nabota margin is royalty-encumbered and the domestic tail is price-regulated.
Base year is clean FY2025, not the depressed TTM. A TTM roll (OP ~11.2%) would smuggle a documented one-off Q1-2026 channel overhaul into the structural starting point; we ramp from the pre-shock FY2025 12.45% instead.
Governance discount of 25%, above the 0.20 base. Council- revised upward for run-rate related-party leakage; sell-side TPs (Samsung ₩210k, Mirae ₩200k) embed a much lighter or no explicit governance haircut and all maintain BUY.

Two-sided case — bear anchors

Medytox strain-surrender ruling. The US ITC found trade-secret misappropriation on the Nabota/Jeuveau botulinum strain (2020); an adverse higher-court ruling in the ongoing Korea civil suit is an existential overhang on the flagship export line. Carried as a 2% failure tail.
Family tunneling intensifies through succession. The CGBio/Sijibio (~₩600bn) restructuring is being run to fund family control; if leakage into the ~17 private vehicles accelerates, the governance discount belongs nearer the council's ~0.30 than our 0.25.
NHI price cuts bite harder than modelled. Scheduled 2H26/2027 generic and off-patent reductions plus PVA cuts could hold the domestic ETC margin below the 13.5% terminal, pulling value toward the MC p25 (₩129k) — at or below today's price.
Channel-overhaul recovery slips past 2H26. If the ETC block-wholesale reset and the Olmetec raw-material issue linger, the "temporary" trough becomes the run-rate and the normalization thesis breaks.
Treasury fortress blocks any re-rating. The holdco's ~29.7% treasury stake entrenches control; if Korea's "value-up" treasury-cancellation push stalls, minorities have no lever to close the discount.

Risks to thesis (tail, not bear case)

Governance / related-party leakage High

~17 family vehicles with asymmetric intra-group billing, a ~29.7% treasury fortress, and five years of negative minority returns. Priced as a 25% post-DCF haircut; intensifying tunneling argues for ~30%.

Medytox strain litigation High

US ITC trade-secret finding on the Nabota/Jeuveau strain; Korea civil suit 2nd-instance ongoing. An adverse ruling is existential for the fastest-growing export line. Carried as a 2% failure tail.

β / cost-of-capital model risk Med

The 1.41 levered β is a sector-anchored override of a suppressed 0.07 regression. If the true β sits between the two, WACC and the whole cushion move materially — TV is ~77% of EV.

NHI drug-price cuts Med

Recurring Korean reimbursement-price reductions on established drugs plus 2H26/2027 generic cuts cap the domestic ETC base — a structural drag on the largest revenue line.

Channel-overhaul recovery timing Low

The Q1-2026 ETC distribution reset is documented as temporary with volume intact; risk is mainly that the modelled 2H26 normalization slips a few quarters, not that it fails.

Negative FCF / dilution Low

FY2024 FCF was −₩103.7bn during the capex-up phase and the share count creeps up annually. Manageable against an IG balance sheet, but a persistent capital sink if the plant build over-runs.

10-year forecast

Revenue ₩1.67T → ₩2.83T over 10y (~6% CAGR off the clean FY2025 base). Operating margin normalizes off the channel-overhaul-depressed TTM back toward 12.5% and grinds to a 13.5% terminal — low-to-mid teens, not aesthetics-peer 20%+.

Monte Carlo distribution

The market sits inside the distribution, not outside it: the p5 tail (₩112k) is ~14% below today's ₩131k and 29% of 1,000 correlated draws land under the price. This is a modest, governance-discounted cushion, not a deep mispricing.

Mean ₩140372.35 ± ₩17633.47/sh, 1000 iterations (0 failed). P(intrinsic < market ₩130600.00) = 29.3%.

Cost of capital build

Risk-free rate	3.65%
Mature-market ERP	4.23%
Levered β	1.40
Weighted CRP	0.68%
Cost of equity	10.55%
Pre-tax cost of debt (synth Aaa/AAA)	4.05%
D / V	~36%
WACC	7.86%

Full year-by-year DCF

Year	Revenue	Op mgn	EBIT	EBIT(1−t)	Reinvest	FCFF	PV
1	₩1.67T	12.55%	₩209.18B	₩153.96B	₩86.59B	₩67.37B	₩62.46B
2	₩1.77T	12.66%	₩223.72B	₩164.66B	₩91.83B	₩72.82B	₩62.60B
3	₩1.87T	12.77%	₩239.25B	₩176.09B	₩97.40B	₩78.69B	₩62.71B
4	₩1.99T	12.87%	₩255.85B	₩188.30B	₩103.31B	₩85.00B	₩62.80B
5	₩2.11T	12.97%	₩273.57B	₩201.35B	₩109.57B	₩91.78B	₩62.87B
6	₩2.24T	13.08%	₩292.51B	₩215.29B	₩98.34B	₩116.95B	₩74.28B
7	₩2.37T	13.18%	₩312.73B	₩230.17B	₩104.30B	₩125.87B	₩74.12B
8	₩2.52T	13.29%	₩334.34B	₩246.07B	₩110.62B	₩135.45B	₩73.95B
9	₩2.67T	13.40%	₩357.41B	₩263.05B	₩117.33B	₩145.72B	₩73.76B
10	₩2.83T	13.50%	₩382.05B	₩281.19B	₩124.44B	₩156.75B	₩73.56B

Methodology & flags

Damodaran FCFF DCF, 10y explicit + perpetuity, in KRW. Risk-free 3.65% (local-currency government bond). Synthetic credit Aaa/AAA. CRP 0.68% from revenue-weighted country mix × Damodaran 2026 CRPs. Terminal ROIC faded to 12.92%; 25% governance haircut applied post-DCF. Monte Carlo: 1000 iterations. Engine v1.0.0 · result: /Users/valentin/Documents/notes_jiliac_labs/Finance/Damodaran/valuations/daewoong/output/2026-05-31-result.json

R&D cap: ON · Lease cap: OFF · Failure: ON · ESO: OFF
Governance haircut: 25% applied post-DCF (₩192471.08 > ₩144353.31)
Sensitivity tornado: not run

FCFF DCF · dark theme v3. Generated 2026-05-31T23:18:13 from /Users/valentin/Documents/notes_jiliac_labs/Finance/Damodaran/valuations/daewoong/output/2026-05-31-result.json.