20170106-三星证券-Optimism_abounds_29页_1011kb

Sector Update Summary

Core Content

This document provides an analysis of the biotechnology sector, with a focus on three diagnostic companies: Seegene, i-SENS, and Boditech Med. It outlines the performance of these firms in 4Q16 and their expected performance in 2017, along with target prices and valuation metrics.

Main Points

• Sector Outlook (Overweight): The biotechnology sector is expected to perform well in 2017, with a positive outlook for earnings growth.
• Company Performance in 4Q16:
  • Seegene: Likely to exceed consensus estimates with strong sales of test kits for respiratory infections and the launch of new products, leading to a 21.2% increase in sales and a 74.4% increase in operating profit.
  • i-SENS: Expected to meet forecasts with rising utilization at its Songdo plant and exports to Arkray in Japan, leading to a record result.
  • Boditech Med: Solid sales driven by exports of the AFIAS-6 automated immunoanalyzer, with a 5.9% increase in operating profit.
• Earnings and Valuation:
  • Combined sales for the sector in 4Q16 are expected to reach KRW69.1b (up 25.8% y-y), with operating profit at KRW15.7b (up 24.6% y-y) and net profit at KRW13.2b (up 452.7% y-y).
  • Despite strong earnings growth in 2016, the shares experienced significant declines, which the report attributes to uncertainties and negative news about Korea's R&D capabilities.
• Target Prices and Valuation Bands:
  • Seegene: Target price at KRW45,000, 25.7% upside, with a forward P/E of 86.1 and P/B of 6.1.
  • i-SENS: Target price at KRW43,000, 48.5% upside, with a forward P/E of 15.3 and P/B of 2.2.
  • Boditech Med: Target price at KRW29,000, 34.3% upside, with a forward P/E of 21.2 and P/B of 4.8.
• Recommendation: The report recommends accumulation (buying) due to the strong earnings outlook and the current undervaluation of the stocks.

Key Information

• Sales Growth: In 2016, Seegene's sales grew by 13.8%, i-SENS by 22.3%, and Boditech Med by 38.7%.
• Operating Profit Growth: Seegene's operating profit increased by 34.8%, i-SENS by 20.1%, and Boditech Med by 19.4%.
• Net Profit Growth: Seegene's net profit grew by 452.7% in 2016, indicating a significant improvement.
• Valuation Metrics:
  • Seegene: Current price at KRW35,800, market cap at KRW939.18b.
  • i-SENS: Current price at KRW28,950, market cap at KRW124b.
  • Boditech Med: Current price at KRW21,600, market cap at KRW55b.
• Future Growth Drivers:
  • Seegene: Overseas subsidiaries and ODM sales to Beckman Coulter.
  • i-SENS: Plant opening in China and export growth.
  • Boditech Med: Product approvals and continued export expansion.

Financial Highlights

• Seegene's 4Q16 Sales: KRW20.6b, up 21.2% y-y.
• i-SENS's 4Q16 Sales: KRW34.0b, up 20.0% y-y.
• Boditech Med's 4Q16 Sales: KRW14.5b, up 14.3% y-y.
• 2017 Guidance:
  • All three firms expect a 20% year-over-year sales growth.
  • Margins are expected to increase to 20%, 23%, and 27% for Seegene, i-SENS, and Boditech Med, respectively.

Summary of Financial Data

ODM Partners

• Seegene has signed ODM contracts with Beckman Coulter, Qiagen, Becton Dickinson, and Hologic.
• Hologic is a major player in molecular diagnostics with a 14.4% market share in the US and a strong presence in CT, NG, HPV, and Trichomoniasis diagnostics.

Outlook

The report highlights the potential for continued growth in the sector, driven by strong product performance, international expansion, and ODM opportunities. The positive earnings outlook and current undervaluation are key factors supporting the accumulation recommendation.