Seegene’s earnings outlook has been lowered, but ... “Dividends stand out at times like this”

[Financial News] Seegene reported third-quarter results below market expectations, but its dividend appeal is emerging as an investment alternative. While a stronger won and price competition in diagnostic reagents could slow the recovery in profitability, analysts say expanded dividends and the resulting shareholder returns could help support the share price. According to Daol Investment & Securities on the 9th, Seegene’s consolidated third-quarter revenue was 123.1 billion won, up 8% from a year earlier but down 9% from the previous quarter. Operating profit was 11.6 billion won, up 21% year on year but down 46% quarter on quarter, 43% below the market consensus. The operating margin also fell 6.5 percentage points from the previous quarter to 9.4%.
Park Jong-hyun, an analyst at Daol Investment & Securities, cited a decline in average selling prices (ASP) due to the stronger won and price competition in diagnostic reagents as factors behind the weak results. He said that intensifying competition in the PCR reagent market, a revamp of the product portfolio, expansion of products covered by the European Medical Device Regulation (MDR), and the French subsidiary’s shift to direct sales had also affected profitability.
Daol Investment & Securities also lowered its earnings forecast for next year. It expects revenue of 583.9 billion won, up 11% year on year, but cut its estimate by 6% from its previous forecast. It forecasts operating profit of 91.7 billion won, an increase of 19%, but lowered its previous estimate by 20%. The firm said that a stronger won, which could push down ASP, and intensifying competition could hinder an earnings recovery.
However, it viewed the potential for higher dividends positively. Park said, “With this year’s expected dividend per share (DPS) at 1,200 won, the dividend yield is 3.9%. Taking into account the requirements for separate taxation of dividend income, we expect next year’s DPS to rise to 1,440 won and forecast a dividend yield of 4.6%.”
The firm said that even as earnings growth slows, increased dividends and the resulting shareholder returns could make the stock more attractive to investors.
Daol Investment & Securities maintained its Buy rating on Seegene but lowered its target price from 52,000 won to 50,000 won. That represents 61.3% upside from the closing price of 31,000 won on the 6th.
Park said, “With the disclosure of a report on a related party’s plan for a block deal involving 1 million shares, concerns about an overhang, and declining margins due to the stronger won, it is difficult to expect a short-term rise in the share price. However, the dividend yield is expected to provide downside support.”

[email protected] Kang Jung-mo Reporter