Investment highlight
For the first time, Baycom Medical-B (02170) gives the winning industry a rating, with a target price of HK $28.64. The reasons are as follows:
Reproductive genetics market is an emerging market with great potential. The medical device market of reproductive genetics has just started in China and is developing rapidly. In terms of subdivision, the reproductive genetics reagent plate has maintained rapid growth in the past few years. We expect the reproductive genetics reagent plate to accelerate its expansion in the future. The medical device market is in a period of transition, and the traditional manual equipment is gradually being replaced by more intelligent and automatic equipment.
Baycom Medical has a leading innovation platform in China, and its kit product portfolio has achieved full reproductive cycle coverage. Baikang Medical has an advanced assisted reproductive platform in China, which can cover the whole reproductive cycle, including pre-implantation, prenatal and postpartum. In addition to the kit, the company also develops genetic testing equipment and instruments. Baikang's PGT-A product is the only third-generation IVF gene detection kit approved by the FDA in China, which can be used for aneuploid detection. PGT-A can increase the pregnancy rate to 72.0% and reduce the abortion rate to 6.9%. The company is developing two other PGT products, PGT-M and PGT-SR kits. All three PGT products are based on NGS (next Generation sequencing) technology to form a complete kit portfolio. In addition, the company has expanded its coverage to the prenatal and postpartum stages and is developing kits for all stages of the reproductive cycle.
Provide groundbreaking solutions with industry-leading laboratory and clinical support capabilities. The vast majority of IVF service providers are owned by public hospitals and are subject to public restrictions on investment in new equipment and technologies. Becon Medical is committed to providing better services for infertile patients in China. The company plans to provide one-stop customized solutions according to the individual needs of customers. What is the biggest difference between us and the market? Based on the above investment highlights, we give a more optimistic income forecast for the reproductive genetics medical device industry.
Potential catalyst: the commercialization of the third generation test tube baby gene detection kit PGT-A; PGT-M and PGT-SR kits have been put on the market.
Valuation and suggestion
We estimate that the EPS of the company from 2021 to 2022 is-0.03 yuan and 0.17 yuan respectively. Based on the DCF valuation method, it is assumed that the WACC is 10.0%, the sustainable growth rate is 1.5%, and the fair value of the company is estimated to be HK $7.83 billion. For the first time, the company was given a target price of HK $28.64, corresponding to 44.21% upside space.
Risk.
Product development failed; clinical progress failed to meet expectations; pipeline products failed to achieve commercialization; reliance on individual suppliers; increased competition; the number of reproductive clinics with PGT licenses was lower than expected; profitability was uncertain; failed to obtain step-by-step financing.