After getting listed at the Shenzhen stock exchange in China, stocks of a Chinese medical firm soared nearly 12-fold on its debut as investors saw potential in the company’s products during the novel coronavirus pandemic.
Share of Contec Medical Systems, based in the Northern China is a diagnostic devices maker, increased by as much as 30-fold during its first trading day.
After the stellar performance for the company which is only six years old, its market valuation reached 35 billion yuan which was equivalent to 693 times of the earnings per share that the company managed last year.
The growing popularity of online health consultations has benefited the company, said analysts.
“Investors were excited by rising demand for distance medical consultations in mainland China, especially for elderly people with chronic diseases who cannot or do not want to make long-distance hospital trips,” said Carol Dou, a Hong Kong-based senior health care analyst at brokerage UOB-Kay Hian. “The pandemic saw growing acceptance of online consultations.”
There were 17 other companies, all newcomers to the exchange that saw strong market debuts on Shenzhen’s technology board on the same day after the stock market regulator made changes that allow stocks of a debutant to rise or fall without limit in the first five days since debuting.
ChiNext, which was designed on the Nasdaq, a subsidiary of the Shenzhen exchange aims to attract innovative, fast-growing firms – especially technology developers.
Contec raised as much as 416 million yuan by selling 41 million shares which was equal to about a tenth of its enlarged share capital, at 10.16 yuan each. The company plans to use the money to expand production capacity as well as to develop “smart” medical equipment.
Devices that monitor heart conditions, blood pressure and glucose levels, besides ultra-sound scanners and systems that monitor a patient’s vital signs are the cire products manufactured by the company.
This year, the company expects to generate record revenues of 1.25 billion yuan which would be 223 per cent compared to its revenues in 2019. It also anticipates to report a net profit growth of 642 per cent at 547 million yuan for the current year, the company said in its listing prospectus.
“Since the novel coronavirus pandemic broke out in January, demand for some of the company’s products – especially infra-red thermometers and blood oxygen level measuring devices – have seen explosive growth,” it said.
Exports accounted for 73 per cent of its revenue last year.
A new policy aimed at supporting establishment of rural medical clinics as well as companies that install equipment to collect, transmit and store personalised digital medical diagnostic data to facilitate remote consultations for chronic diseases was launched by the Chinese government in 2014.
With respect to the digitalisation of diagnostic data and the deployment of mobile software to allow the sharing of such data among different parties, there are currently two ongoing research and development projects that it is conducting, Contec said.
(Adapted from SCMP.com)