On February 13, Beijing time, MSCI (MSCI), an international index compilation company, announced the results of its quarterly index review for February 2024, including BGI (300676SZ) and many other companies were excluded from the MSCI China Index.
The companies selected for the MSCI China Index mean that the investment value is more prominent, and the world's leading managers also use the MSCI index as an important observation indicator, and the exclusion of BGI from the index this time is naturally interpreted by the market as a pessimistic signal.
However, in the first few days of the new year, BGI's stock price was resilient and did not suffer a significant negative impact. As of now, the company has closed 4401 yuan shares, with a total market capitalization of 182200 million yuan.
Some investors believe that many of the sample adjustments are only regular quarterly adjustments, and the ** samples that are excluded may be excluded because they fall below the market value threshold, rather than the company's own business problems.
According to public information, BGI is the leader of the domestic gene sequencing track, and the company landed on the Shenzhen Stock Exchange in 2017.
According to different application scenarios, gene sequencing is divided into two categories: scientific research and clinical research, BGI focuses on the clinical end, and the company has a rich product line, covering precision medicine, reproductive health, tumor prevention and control, pathogenic infection detection, etc. At present, the company has covered more than 2,000 scientific research institutions and more than 2,300 medical institutions in China, including more than 500 tertiary hospitals, and its market position is undoubted.
In the past few years, due to the ravages of the new crown epidemic, the demand for medical testing has exploded. According to the financial report, in 2020, BGI achieved revenue of 839.7 billion yuan, a year-on-year increase of 19986%, and the net profit attributable to the parent company was 209 billion yuan, a year-on-year increase of 65643%。The company's "Fire Eye" laboratory has made great contributions to the new crown detection, and the company's performance has also opened the ceiling.
However, as the epidemic subsides, the company's performance has gradually declined in recent years, which is also reasonable. From 2021 to 2022, the company's revenue was 676.6 billion yuan, 704.6 billion yuan, and the net profit attributable to the parent company was 146.2 billion yuan, 80.3 billion yuan.
According to the 2023 annual performance forecast disclosed by BGI, the company is expected to achieve operating income of 420 billion to 450 billion yuan, to achieve a net profit of 08 billion yuan-11 billion yuan, still in a downward channel.
From the perspective of the industry, the decline in the performance of medical testing companies is actually the norm, and many companies even lose money, such as Berry Gene (000710.).SZ) previously expected net profit attributable to the parent company in 2023 to be -40 billion yuan, and -2 in the previous yearCompared with 5.5 billion yuan, the amount of loss is still expanding. In fact, such loss-making performance is not a minority in the industry. In contrast, it is not easy for BGI to maintain profitability.
Behind the resilience of performance may be related to the company's cost advantage. Some products such as gene sequencers have been monopolized by overseas leaders such as Illumina for a long time, while the upstream suppliers of BGI are mainly made by MGI, which has a strong cost advantage, so it can stand out in the fierce competition.
In addition, the company's "Fire Eye" laboratory is also actively seeking to transform into a universal genetic testing platform, and the normalized testing business continues to grow, including birth defect prevention and control, early tumor screening, and even health management, etc., and the "Fire Eye" laboratory is expected to become part of the new infrastructure of the medical and health system in various places in the future.
BGI also said in its 2023 performance forecast that the revenue of reproductive health business and multi-omics business increased slightly year-on-year, and the revenue of tumor prevention and control achieved significant year-on-year growth, which may be one of the reasons why the company's performance is still profitable.
There are various signs that the new crown-related business is expected to gradually stabilize, and the burden of declining performance may be cleared.
In the long run, gene sequencing is still a boom track, and according to BCC Research data, the scale of gene sequencing services is expected to increase from 69 in 2020$9.4 billion to $210 in 2026$6.6 billion, with a CAGR of 191%, the growth rate is higher.
In fact, the cost of gene sequencing has been on a downward trend, and in the "Human Genome Project" in the 90s, it took about 8,000 researchers from six countries 13 years to complete the sequencing of a person's genome, which cost $3.8 billion. In 2015, the cost of whole-genome sequencing for a single person had dropped to about $1,000, and now that number has dropped to $100.
Price reductions have made many things possible, and have also brought about the continuous expansion of downstream application scenarios, and the market space for gene sequencing has been rising, which is somewhat similar to the cost of electricity in the new energy industry, and the technological innovation on the supply side has brought about an increase in penetration.
For example, gene sequencing is frequently used for early cancer screening, and with the gradual deepening of China's aging society and the improvement of health awareness year by year, the market demand for cancer prevention and control is expected to be gradually released.
In 2023, a number of the company's products in the field of tumor prevention and control were approved, including the fecal occult blood detection kit obtained the medical device registration certificate issued by the Hubei Food and Drug Administration, and the fecal DNA methylation combined detection kit and HPV typing detection product obtained the medical device registration certificate issued by the State Food and Drug Administration.
Not only that, BGI's AD (Alzheimer's disease) test may become another definite growth point. According to brokerage research, in the future, the elderly population will be screened regularly every year, and the scale of China's AD diagnosis market is expected to exceed 100 billion yuan. In addition, the company's colorectal cancer detection product Huachangkang was approved for marketing in December last year and is also expected to become a potential blockbuster product.
In addition to the domestic market, the company also actively expands overseas channels and implements the strategy of going overseas.
It is difficult to obtain overseas qualifications, and there are high standards for the technical level, production process and management of enterprise products, and BGI can successfully enter the market with the help of the brand equity and various qualifications accumulated by global new crown testing in the past few years.
In 2023, the company officially signed a memorandum of cooperation with the Saudi Public Health Authority, in addition, the company has reached a number of cooperation intentions and signed agreements with medical institutions, scientific research institutes and other partners in Thailand, Brazil, Argentina, Chile and Serbia, which is expected to provide support for long-term performance with the promotion of the company's precision medicine technology in the global market.
Epilogue——
BGI is the first echelon of genetic testing, and in the post-epidemic era, the company's performance has declined slightly, and its market value has shrunk by more than 7%, which may be one of the reasons why it was excluded from the MSCI China Index. However, as a track leader, the company's fundamentals are not slotted, and its valuation is close to the bottom of history.
Some institutions predict that in 2023, with the decline in abnormal demand, BGI's personnel will be reduced, and the cost may decrease during the period, and after 2024, with the gradual increase in overseas and new products, profitability is expected to rise under the scale effect, and the future repair space is worth paying attention to.
Author: Flying Fish.