1. Chong Kun Dang’s Q2 Earnings: Sales Growth Coupled with Profit Decline

Chong Kun Dang reported KRW 429.6 billion in sales for Q2 2025, exceeding expectations. The positive impact of new product launches and upfront payments from the CKD-510 technology export contract contributed to this growth. However, operating profit, at KRW 22.2 billion, fell significantly short of expectations, indicating deteriorating profitability.

2. Analyzing the Profit Decline: Hit by Rising Raw Material Prices and Currency Fluctuations

The primary reason for the decline in operating profit is attributed to rising raw material costs and currency fluctuations. Sharp increases in the prices of key raw materials like choline alfoscerate and carvedilol, coupled with a rise in the KRW/USD and KRW/EUR exchange rates, put pressure on profitability. Furthermore, the rise in the Baltic Dirty Tanker Index likely increased raw material transportation costs, exacerbating the situation.

3. External Factors: Growing Macroeconomic Uncertainty

The high interest rate environment in the US and Europe contributed to the appreciation of the KRW against the USD, consequently impacting import costs of raw materials. Domestic interest rate hikes may have also negatively affected Chong Kun Dang’s profitability. Volatility in the Chinese economy, influencing the China Containerized Freight Index, added to uncertainty in the export environment.

4. Future Growth Drivers: CKD-510 Technology Export and New Products

The CKD-510 technology export contract holds promise as a long-term growth driver. However, investors should be mindful that external factors like US interest rate fluctuations can impact the present value of future royalty income. The market response and sales contribution of new products launched in Q1 need continuous monitoring.

5. Investor Action Plan: Finding Opportunities Amidst Uncertainty

Despite the short-term profit decline, Chong Kun Dang’s long-term growth potential remains. Investors should closely monitor trends in raw material prices, exchange rates, the sales performance of new products, and the progress of the CKD-510 technology export contract to inform their investment strategies.