Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Nearly 25 years of experience in analyzing hundreds of companies, especially in Asia. Deep expertise in the following sectors:
- Technology (E-commerce, SaaS, Internet)
- Consumer 
- Special Situations/Deep Value Plays
- Holdcos/Stubs
- Asian Unicorns/Private Companies

Korea/Asia, Events, IPOs

SD Biosensor: More Stringent Regulations for In-Vitro Diagnostics in Europe in 2022 & End of Lock-Up

SD Biosensor IPO: Improving Investor Sentiment & Valuation Rerating

SD Biosensor Offering Price/Size Adjustment & Valuation Re-Review

Equity Capital Markets

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<h2>Trading Strategy Post IPO</h2>
<p>The combination of much higher share prices of the comps in the past month, higher gray market price as compared to the IPO price, the increasing delta variants of COVID-19 around the world, and significant reduction in the IPO price (versus the original IPO price range) suggest that there could be a nice pop in SD Biosensor's share price in the first day of trading.</p>
<p><em>We would not be surprised to see the share price pop to about 75,000 won to 85,000 won level in the first hours of trading. </em></p>
<p>We have assumed the company to generate net profit of 1.4 trillion won in 2021 (up from 622 billion won in 2020). However, we estimate net profit to decline to 560 billion won in 2022, as we expect COVID-19 to become better controlled next year resulting in lower demand of the company's products.</p>
<p>Despite the strong growth in sales and operating profit in 2021, we expect this trend to reverse in 2022, mainly due to improved COVID-19 situations in many parts of the world next year, reducing the need to use COVID-19 test kits. We estimate its sales to decline by 50% YoY to reach 1.9 trillion won and operating profit to decline by 62% YoY to reach 700 billion won in 2022. </p>
<p>Our net profit estimates would be proven to be too low if there is a resurgence of delta variants/other variants and if the COVID-19 vaccines prove to be less effective against these new variants. </p>
<p><em>Overall, despite the likely first day pop (up 40-60%), we think that over a longer time period (1 year), there is a bigger probability that the share price will retreat to lower levels. </em><em>At the IPO price of 52,000 won, this would represent an implied market cap of 5.3 trillion won. This would also suggest an implied P/E of 9.5x using our estimated net profit of 560 billion won in 2022. </em></p>
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Trading Strategy Post IPO
The combination of much higher share prices of the comps in the past month, higher gray market price as compared to the IPO price, the increasing delta variants of COVID-19 around the world, and significant reduction in the IPO price (versus the original IPO price range) suggest that there could be a nice pop in SD Biosensor's share price in the first day of trading.
We would not be surprised to see the share price pop to about 75,000 won to 85,000 won level in the first hours of trading. 
We have assumed the company to generate net profit of 1.4 trillion won in 2021 (up from 622 billion won in 2020). However, we estimate net profit to decline to 560 billion won in 2022, as we expect COVID-19 to become better controlled next year resulting in lower demand of the company's products.
Despite the strong growth in sales and operating profit in 2021, we expect this trend to reverse in 2022, mainly due to improved COVID-19 situations in many parts of the world next year, reducing the need to use COVID-19 test kits. We estimate its sales to decline by 50% YoY to reach 1.9 trillion won and operating profit to decline by 62% YoY to reach 700 billion won in 2022. 
Our net profit estimates would be proven to be too low if there is a resurgence of delta variants/other variants and if the COVID-19 vaccines prove to be less effective against these new variants. 
Overall, despite the likely first day pop (up 40-60%), we think that over a longer time period (1 year), there is a bigger probability that the share price will retreat to lower levels. At the IPO price of 52,000 won, this would represent an implied market cap of 5.3 trillion won. This would also suggest an implied P/E of 9.5x using our estimated net profit of 560 billion won in 2022. 


SD Biosensor

SD Biosensor Bookbuilding Results