Building a Factory in Thailand to Meet Demand
The author is an analyst of NH Investment & Securities. He can be reached at kyeongkeun.kang@nhqv.com. -- Ed.
Biodyne offers LBC systems and diagnostic kits. Possessing robust competitiveness in the LBC system market thanks to its in-house-developed blowing technology, the firm has recently signed an exclusive contract with a global pharma. We expect the deal to clear a path for sound mid/long-term earnings growth and solid margins.
Boasts superior LBC technology
Biodyne specializes in the manufacturing and distribution of liquid-based cytology (LBC) equipment and diagnostic kits. In addition to being supplied to five major health examination centers and university/general hospitals in Korea, its products are also exported to 20 countries, including Japan, Russia, and Portugal.
Used in the screening for cervical cancer, LBC testing allows for early diagnosis at a high level of precision for relatively low cost. Representing an alternative to pap smear tests, the adoption of LBC testing has been on the rise as of late, as the technology is also used for HPV testing. Developed based on the company’s own blowing technology, Biodyne’s LBC testing kits offer superior precision versus those of competitors.
To enjoy robust growth on exclusive contract with global pharma
Backed by its robust LBC testing technology, Biodyne signed an exclusive contract with a global pharma in Feb 2019 (minimum contract period of 15 years, milestone fees of W9bn). Under the contract, Biodyne is to reap royalty income from sales of the pharma’s LBC testing equipment (manufactured using Biodyne’s technological knowhow) and acquire exclusive supply rights for related testing kits. Going forward, the global pharma plans to expand its equipment/test kit sales into Asia/Europe (2H21), North America (2022), and the global market at large (2023).
Thanks to the above-noted contract, Biodyne is expected to enjoy mid/long-term earnings growth and a clear path towards strong profitability. In order to meet demand stemming from the contract, the firm plans to ramp up its capacity via the construction of a factory in Thailand. Three production lines (production of around 13.2mn units pa) are to be completed by end-2022, and seven more lines are to come down the road. Based on its IPO price band and 2023F earnings guidance (25% discount applied), Biodyne’s 2021F P/E comes in at 10.8~13.8x.