Soaring Diagnostic Kit Stocks, Now Time to Separate the Wheat from the Chaff

Rising Trend Expected in Europe Spread
But Rapid Surge in Short Term Poses Overvaluation Risk
Need to Consider European Sales Rights and Technical Capabilities

[Image source=Yonhap News]

[Asia Economy Reporter Park Jihwan] As the global spread of the novel coronavirus infection (COVID-19) causes an explosive demand for COVID-19 diagnostic kits, related stocks continue to soar.

According to the Korea Exchange on the 9th, Seegene, a KOSDAQ-listed company regarded as the leading stock in COVID-19 diagnostic kits, recorded 60,500 KRW, up 25.13% compared to the previous trading day, as of 9:52 AM. Seegene also closed at 48,350 KRW on the 6th, the previous trading day, rising to the price limit of 29.97% (11,150 KRW). It has risen by 95.8% just this year. Seegene's upward trend steepened after receiving emergency use approval for COVID-19 diagnostics from the Ministry of Food and Drug Safety in mid-last month. In particular, the COVID-19 diagnostic reagent 'Allplex 2019-nCoV Assay' received European certification (CE-IVD), sparking a surge in orders from over 30 countries worldwide, fueling the rally.

Stocks related to diagnostic kits such as EDGC (Solgent), SuzenTec, and LabGenomics are also soaring. At the same time, these stocks surged 16.26%, 27.86%, and 22.37% respectively compared to the previous day. Last week, SuzenTec announced it succeeded in developing a product that can diagnose infection within 10 minutes using blood. LabGenomics also recently announced the completion of certification procedures for export approval of COVID-19 diagnostic kits and the start of overseas sales. EDGC (Solgent) received emergency use approval for COVID-19 diagnostic kits and European certification (CE-IVD).

The short-term evaluation of these diagnostic kit stocks is positive. Dalmi Lee, a researcher at SK Securities, forecasted, "In the case of Seegene, due to the surge in demand for diagnostic kits caused by the spread of COVID-19, operating profit this year is expected to reach 31.6 billion KRW, 17.4% higher than previously estimated." A financial industry insider said, "There are clear financial benefits for diagnostic kit companies in the first and second quarters of this year," adding, "Sales volume has increased to an unprecedented level, so sales revenue and net profit are expected to rise significantly."

Future stock price movements are expected to be determined in overseas markets. While the spread of COVID-19 is somewhat slowing in Korea, the spread is accelerating in European countries such as Italy. It is analyzed that further increases can be expected for companies that have obtained European sales approval.

In the securities industry, there are concerns that COVID-19 diagnostic kit stocks have surged rapidly in a short period and may be overvalued, so careful selection is necessary. It is emphasized that it should not end as a short-term theme stock benefiting from COVID-19 but that performance and technology support must be sufficiently considered. In the case of blood diagnostic kits developed by some companies such as SuzenTec, regardless of technological capability, they are not yet subject to emergency use approval by the Korea Disease Control and Prevention Agency and do not have European sales rights, but they have recently greatly benefited from the surge in related stocks.

This content was produced with the assistance of AI translation services.