[Click eStock] "SD Biosensor Diversifies Through M&A... Relaying Expected Next Year"

[Asia Economy Reporter Myunghwan Lee] Kiwoom Securities announced on the 8th that it has newly issued a buy rating and a target price of 75,200 KRW for SD Biosensor. This is because portfolio diversification through mergers and acquisitions (M&A) and equity investments is expected during the transition to an endemic (periodic outbreak of infectious diseases).

Kiwoom Securities projected the company's sales this year to increase by 2.7% year-on-year to 3.0105 trillion KRW, while operating profit is expected to decrease by 9.6% to 1.2332 trillion KRW. They anticipate a decline in operating profit margin due to price reductions in self-diagnostic kits driven by increased sales volume and additional sales expenses for the market launch of the on-site molecular diagnostic device M10. However, they forecast that the business will return to normal track from next year, recovering profit margins. The annual sales for 2023 are expected to decrease by 35.3% year-on-year to 2.2485 trillion KRW, with operating profit forecasted to decline by 18.6% to 1.003 trillion KRW.

It is analyzed that SD Biosensor secured a large amount of cash through the COVID-19 pandemic. As of the end of last year, the company is making various attempts based on approximately 2.5 trillion KRW of combined resources from affiliated companies. In the molecular diagnostics field, the M10 device is being supplied to domestic and overseas university hospitals and airports. By simply changing the cartridge used in the module, indications can be expanded, and since cartridges are consumables that can be sold continuously, Kiwoom Securities pointed out this as a key business that can support future performance. In the continuous glucose monitoring field, the company plans to launch a device in 2024 that applies continuous glucose monitoring system (CGMS) technology, advancing one step beyond the existing self-blood glucose monitoring system (BGMS) business.

The company is also actively pursuing M&A and equity investments. SD Biosensor is strengthening the foundation for continuous performance growth by acquiring various companies including those in Brazil, Germany, Italy, as well as domestic biotech firms and UbioLogics. Based on a diversified business portfolio, it is diagnosed that quarterly sales growth will be possible from the second quarter of 2025. Furthermore, annual sales and operating profit growth are expected in 2026.

Researcher Hyemin Heo of Kiwoom Securities said, "The demand for COVID diagnostic kits, which will be more resilient than market concerns, and the business diversification strategy through M&A are points that strengthen the fundamentals," adding, "the performance of future businesses such as molecular diagnostics and continuous glucose monitoring system (CGMS) will begin to become visible from the end of 2023, leading to re-rating."