20170516-三星证券-Sales_grow_but_margin_drops_11页_601kb

Boditech Med Summary

Core Content

Boditech Med is a Korean diagnostic company that reported its 1Q results, which showed mixed performance. Despite a year-over-year increase in sales and operating profit, the results missed consensus forecasts, leading to a downward revision in the target price. The company is focusing on expanding its product portfolio and improving its market position through product approvals and strategic partnerships.

Main Points

• 1Q Results:
  • Sales increased by 32% y-y to KRW13.3b, but missed consensus by 0.9%.
  • Operating profit rose 3.1% y-y to KRW2.6b, but also missed consensus by 13.8%.
  • Net profit fell 35.2% y-y to KRW2.0b, missing by 13.7%.
• Product Performance:
  • Diagnostic cartridge sales rose 40.7% y-y to KRW11.7b, with notable growth in cancer (307.8%) and infection (29.4%) products.
  • Reader sales declined 8.8% y-y to KRW1.3b.
• Market Expansion:
  • Exports grew 30% y-y to KRW12.9b, with significant growth in the Americas (91.7%) and Europe (256.8%).
  • China and the Middle East/North Africa showed mixed performance.
• China Approvals:
  • China's FDA approved two POCT devices and 10 reagents, which should help Boditech expand its market share through local production and improved distribution.
• Valuation Adjustments:
  • The target price was revised down to KRW23,000, a 11.5% decrease from the previous target of KRW26,000.
  • The target price offers a 19.2% upside from the current price of KRW19,300.
• Financial Performance:
  • The company expects to improve its product mix and top-line growth in the second half of the year.
  • The 2017E EPS is expected to be KRW700, and 2018E EPS is expected to be KRW1,141, with respective growth rates of -7.5% and -6.9% from previous estimates.
• Valuation Metrics:
  • P/E ratio: 35.5 (2016), 27.6 (2017E), 16.9 (2018E).
  • P/B ratio: 5.9 (2016), 5.0 (2017E), 3.9 (2018E).
  • EV/EBITDA multiple: 29.8 (2016), 22.6 (2017E), 14.0 (2018E).
• Market Position:
  • The company is expected to win US approvals for several reagents in 2H, which could improve its product mix.
  • It signed a USD4.5m deal with McKesson, the largest US medical device distributor, to supply gFOB and iFOB products.

Key Information

• Analysts:
  • Brian Lee (Analyst)
  • Wonyong Park (Research Associate)
• Date: 2017.5.16
• Target Price: KRW23,000
• Current Price: KRW19,300
• Market Cap: KRW449,43b/USD399.99m
• Shares (float): 23,286,272 (72.2%)
• 52-week high/low: KRW30,300/KRW16,813
• Avg Daily Trading Value (60-day): KRW1.7b/USD1.5m
• Recommendation: BUY
• Sales Growth:
  • 2017E sales are expected to be KRW67.2b, with a 22.3% growth compared to 2016.
  • 2018E sales are expected to be KRW84.0b, with a 1.3% decrease from 2017E.
• Profit Margins:
  • Operating margin fell to 19.7% in 1Q17, down 5.6% y-y.
  • Pre-tax margin and net margin also declined.
• Financial Statements:
  • Income Statement: Sales are expected to grow significantly in 2017 and 2018, while net profit and operating profit show mixed results.
  • Cash Flow Statement: Free cash flow is projected to increase, indicating improved financial health.
  • Balance Sheet: Total assets are expected to grow, with an increase in current and fixed assets.
• Financial Ratios:
  • ROE is expected to rise to 26.2% in 2018E.
  • Interest coverage ratio is projected to increase, reflecting improved financial stability.

Summary

Boditech Med is experiencing growth in sales and exports, particularly in the Americas and Europe, but faces challenges with margin compression due to increased COGS and SG&A expenses. The company is expected to benefit from new product approvals in China and potential US market expansion, which could improve its product mix and top-line growth. Despite the downward revision in target price, the firm maintains a BUY rating due to its strategic moves and growth potential. Financial health indicators, such as free cash flow and interest coverage, are improving, suggesting a positive outlook for future performance.