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Impact of falling COVID-19-related revenue is easing

Revenue comes in line; operating losses continue, but SG&A expenses fall to lowest level in 11 quarters

In 2Q23, Seegene’s COVID-19-related revenue (test kits and reagents) slumped 75% YoY to W16.8bn. Instruments/other revenue also declined 20% YoY to W18.2bn. However, non-COVID-19 test kit revenue grew 31% YoY to W49.9bn, bringing overall revenue in line with the consensus. Operating losses continued, but SG&A expenses fell 24% YoY to the lowest level in 11 quarters.

Trading at a 12-month forward EV/EBITDA of 8x, a discount to global peers (14x) and the three-year average (9x)

Non-COVID-19 test kit revenue per PCR detection machine, which fell to W6.3mn during the pandemic, has recovered to W8.9mn. In 4Q23, we forecast that figure to surpass the pre-pandemic level (W11.7mn). The number of PCR detection machines installed has also increased to 5,600 units from 1,800 units pre-pandemic. Given non-COVID-19 test kit revenue trends and cost-saving efforts, we expect quarterly revenue to continue to grow sequentially from 3Q23 through 4Q24. We expect Seegene to swing to an operating profit in 4Q23, with full-year OP margin recovering to double-digit levels from 2024.