On the 24th, with the number of daily confirmed cases of COVID-19 in Korea recorded a record high of 4,116, stocks related to diagnostic kits are drawing attention again. This is because the prospect that the demand for COVID-19 diagnostic kits will remain at a high level is gaining strength even after ‘with Corona’ (step-by-step recovery of daily life). In the securities industry, some analysts say that diagnostic kit makers will advance into new businesses with the cash they earned during the pandemic. This is advice to pay attention to long-term growth potential through business diversification.
Demand for diagnostic kits continues
on this day Seegene(71,900 +17.10%)Silver rose 12.97% to close at 62,700 won. SD Biosensor(58,000 +9.43%)closed at 5,1600 won, up 0.98%. Seegeneclass SD Biosensorhas risen 17.86% and 12.66%, respectively, this month, showing signs of a rebound.
The stock price of domestic diagnostic kit-related stocks was sharply adjusted as their earnings peaked this year and are expected to decline from next year. Seegenehas plummeted 44.87% this year through the end of last month, SD Biosensorfell 24.92% from the listing date (July 16) to the end of last month. According to FnGuide Seegeneclass SD BiosensorThe company’s annual operating profit is projected to decline by 33.3% and 36.8% YoY next year.
The trigger for the rebound was the re-spreading of COVID-19. Experts believe that the demand for diagnostic kits will remain at a high level even after the With Corona. On this day, the number of daily confirmed cases exceeded 4,000 for the first time in Korea, and some European countries, including Austria and the Netherlands, resumed lockdown measures due to a surge in confirmed cases.
The securities industry has recently begun to predict that the earnings slowdown of diagnostic kit makers will not be as big as expected. Won Jae-hee, a researcher at Shinhan Investment Corp., said, “The number of confirmed cases of COVID-19 is increasing in countries that have switched to With Corona, and there are many countries where government-led quarantine policies are still continuing. “He said.
The earnings forecasts of diagnostic kit makers are also rising. According to FnGuide SeegeneThe consensus for this year’s operating profit (average of securities companies’ estimates) is 620.7 billion won. This is an increase from the estimate three months ago (597 billion won) and a month ago (617.5 billion won).
As the share price reflected negative news in advance, the valuation burden (the share price relative to earnings) eased. Lee Ji-soo, a researcher at KTB Investment & Securities, said, “Seegeneclass SD BiosensorThe 12-month forward price-earnings ratio (PER) is 8.6 times and 7.1 times, respectively, and it is undervalued compared to the average PER of global diagnostic companies (25 times) even considering the decline in sales of COVID-19 diagnostic kits.”
Business diversification expectations
There is also advice to pay attention to the overall growth of the in vitro diagnostic market. Even if the sales of COVID-19 diagnostic kits decrease, it is analyzed that the growth will continue in the mid- to long-term thanks to the increase in sales of other products. “As the medical paradigm shifts from treatment to prevention and diagnosis, the entire in vitro diagnostic market is growing,” Lee said.
In vitro diagnosis is a technology that uses samples (saliva, blood, urine, feces, etc.) collected from the human body to determine the presence or absence of disease. It is a concept that includes several technologies such as molecular diagnosis, immunodiagnosis, and blood diagnosis. Molecular diagnosis is expensive and time-consuming, but the accuracy is very high. Immunodiagnosis can receive test results in a short time at low cost, but its accuracy is low. Seegeneis a company specializing in molecular diagnostics based on gene amplification (PCR) tests. On the other hand SD Biosensorhas a diversified portfolio of immunodiagnostics, molecular diagnostics, and point-of-care diagnostics.
Both companies are reducing their dependence on COVID-19 diagnostic kits by launching new products and diversifying their businesses. A typical example is pursuing mergers and acquisitions (M&A) with huge cash earned during the pandemic. SD Biosensorrecently acquired a Brazilian diagnostic company Ecodiagnostica and a continuous blood glucose measurement device company UXN. This researcher saidSD Biosensoris considering M&A of American companies to enter the American market.”Seegeneis seeking to expand into areas other than molecular diagnostics by acquiring foreign diagnostic companies.”
By Seo Hyeong-gyo, staff reporter [email protected]