Contec Medical Systems saw its share price soar nearly 12-fold on its debut on the Shenzhen stock exchange, boosted by high demand for its products during the coronavirus pandemic.
The northern Chinese diagnostic devices maker closed its first day at 118 yuan(US$17.07), up from its issue price of 10.16 yuan. It rocketed as much as 30-fold at one point during trading.
Monday’s stellar performance gave the six-year-old company a market value of 35 billion yuan, equating to 693 times its earnings per share last year.
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The company, headquartered in Qinhuangdao, Hebei province, has benefited from the growing popularity of online health consultations.
“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.”
Contec was one of 18 companies that saw strong market debuts on Shenzhen’s technology board today. They are the first newcomers since the stock market regulator revised the rules to allow debutants to rise or fall without limit in their first five days of trading.
Ten-year-old ChiNext, the Nasdaq-style subsidiary of the Shenzhen exchange, was designed to attract innovative, fast-growing firms – especially technology developers.
Contec raised 416 million yuan by selling 41 million shares, equivalent to a tenth of its enlarged share capital, at 10.16 yuan each, mostly to expand production capacity, but also to develop “smart” medical equipment.
Its core products include devices that monitor heart conditions, blood pressure and glucose levels, besides ultra-sound scanners and systems that monitor a patient’s vital signs.
It expects to record revenues of 1.25 billion yuan this year, up 223 per cent from 2019, with net profit jumping 642 per cent to 547 million yuan, it said in its listing prospectus, stressing these are not forecasts guaranteed to investors.
“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.
In 2014, Beijing announced a policy directive to support the establishment of rural medical clinics and the installation of equipment to collect, transmit and store personalised digital medical diagnostic data to facilitate remote consultations for chronic diseases.
Contec said it has two ongoing research and development projects to enable the digitalisation of diagnostic data and the deployment of mobile software to allow the sharing of such data among different parties.
Despite growth prospects driven by the pandemic, Contec warned in the prospectus that it is exposed to risks from the US-China trade war.
The US accounted for 25 to 31 per cent of its total revenue between 2017 and last year. A 25 per cent tariff was slapped on some of its products, including ultra-sound scanners and heart monitors.
“If the trade friction further escalates, our US customers may cut their orders or demand a price cut from us,” the company said.
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