[Click eStock] "Seegene, Adjustment Is Enough... Reflecting Concerns Over Sharp Decline in COVID-19 Sales"

Mirae Asset Daewoo Report

SiGene researchers are analyzing and testing for the novel coronavirus infection (COVID-19) on the afternoon of the 6th at the SiGene Medical Foundation Molecular Diagnostic Center in Seongdong-gu, Seoul. Photo by Jinhyung Kang aymsdream@

[Asia Economy Reporter Gong Byung-sun] Mirae Asset Daewoo reported on the 26th that Seegene's valuation is declining due to concerns that sales may drop after the end of COVID-19, and thus lowered the target stock price from 275,800 KRW to 188,000 KRW. However, it raised the investment opinion from ‘Trading Buy’ to ‘Buy,’ judging that sales decline can be prevented by utilizing sectors such as biotechnology and medical devices.

As the end of COVID-19 approaches, Seegene is expected to see a decline in sales due to reduced demand for COVID-19 diagnostic kits, which surged last year. When dividing global in vitro diagnostic companies into four major groups, Seegene belongs to the group whose sales are mainly generated from infectious diseases, which have high stock price volatility. Accordingly, as the valuation declined, Seegene’s 12-month forward price-to-earnings ratio fell from 28.6 times in August last year to 6.4 times in February this year.

However, it is expected to offset sales decline through other sectors. By utilizing biotechnology, medical devices, and in vitro diagnostics, it aims to compensate for the sales drop that may occur in the post-COVID era. Kim Chung-hyun, a researcher at Mirae Asset Daewoo, analyzed, “Sales of products such as respiratory, AIDS, and women’s health from Seegene’s increased analytical equipment may increase.”

Future attempts at business diversification and mergers and acquisitions are also positive aspects. On the 22nd, Seegene announced the recruitment of Vice President Park Sung-woo as the head of mergers and acquisitions. Vice President Park graduated with an MBA from Harvard University in the U.S. and has worked at JP Morgan in Hong Kong and New York, Morgan Stanley, and as head of the STX mergers and acquisitions division. He is regarded as an M&A expert with over 30 years of experience. Seegene explained that it plans to diversify its business and enhance expertise in line with the company’s expanded scale due to COVID-19.

Researcher Kim said, “Seegene currently holds over 300 billion KRW in cash assets,” adding, “If there is positive news about strong sales of COVID-19 diagnostic kits and equipment or business diversification, earnings estimates can be revised upward.”