Samsung Biologics headquarters. Samsung Biologics
Samsung Biologics (207940.KS) could face declining profitability due to a union strike and higher bonus payouts, brokerages have warned. The Samsung Biologics union launched a full-scale strike in early May. Several major Korean brokerages have lowered their target prices for the company.
Shinhan Securities released a report Tuesday cutting its target price for Samsung Biologics to 1.8 million won from 1.9 million won. The brokerage cited uncertainty that second-half revenue forecasts and medium-to-long-term profitability could decline depending on the outcome of labor-management negotiations. “It is necessary to pay attention to the results of the wage and collective bargaining agreement,” the report said. “Even if a labor-management agreement is reached, the medium-to-long-term labor cost burden from wage increases is unavoidable, and if the one-time bonus amount is finalized through the negotiation outcome, it must be reflected in provisions.” It added, “We plan to revise our earnings estimates to reflect this.”
The Samsung Biologics union began a partial strike in late April after negotiations with management broke down over demands including wage increases and improvements to the personnel system, and staged a full-scale strike from May 1 to 5. In the early stages of wage negotiations, the union demanded a 30 million won incentive per person, an average 14% wage increase, and distribution of 20% of operating profit as bonuses, but the company proposed a 6.2% increase. The Samsung Biologics union recently left the Samsung Group supra-enterprise union to pursue an independent path.
As uncertainty over labor-management relations and the likelihood of rising labor costs have grown, brokerages have successively lowered their target prices for Samsung Biologics. Daol Investment & Securities cut its target price for Samsung Biologics to 2.1 million won from 2.2 million won on June 30. It cited continuing uncertainties such as the union strike and delays in new orders. Anticipating that the impact of the strike and the burden of rising labor costs would materialize from the third quarter, the brokerage lowered some of its earnings estimates, and also reduced its profit forecasts for 2027-2028 to reflect the expected labor cost burden during the labor-management settlement process.
