B A S E C A R E
CITIC Securities | Basecare Medical-B (02170.HK) Investment Value Analysis Report
September 23, 2021 · Suzhou
Basecare is the leading provider of clinical solutions in assisted reproduction in China. The PGT-A kit independently developed by it is the only PGD/PGS product in China that has obtained the registration certificate for class III medical devices. Given the good prospects of the assisted reproductive industry, as well as Basecare’s first-mover advantage and clear expansion strategy in products and the upstream and downstream industry, Basecare is expected to continue to lead the industry. Basec

As a leader in reproductive genetic reagents, Basecare promotes the product pipeline of the full life cycle. 
Core opinion
Basecare is the leading provider of clinical solutions in assisted reproduction in China. The PGT-A kit independently developed by it is the only PGD/PGS product in China that has obtained the registration certificate for class III medical devices. Given the good prospects of the assisted reproductive industry, as well as Basecare’s first-mover advantage and clear expansion strategy in products and the upstream and downstream industry, Basecare is expected to continue to lead the industry. Basecare is valued as HKD 5.4 billion with reference to DCF valuation. We initiate our fist coverage with a “buy” rating and a HKD 20/share target price.

Basecare is a domestic leader in assisted reproduction with the core technology as the advantages. Founded in 2010, it is China’s leading provider of clinical solutions of PGT in assisted reproduction, and is committed to the R&D and clinical applications of NGS in reproductive health. The PGT-A kit independently developed by it is the only PGD/PGS product in China that has obtained the registration certificate for class III medical device. At the same time, Basecare is developing two other PGT products, namely, PGT-M and PGT-SR kits, which will constitute a complete PGT system. It is estimated that Basecare will complete the registration and certification of the product pipeline covering the full reproductive cycle in the next five years to further consolidate the leading position in the standardization of the PGD/PGS market.

The market and the industry are favored by policies and the era. According to Frost & Sullivan (quoted from the prospectus), the market scale of reproductive genetics medical devices in China was 3.4 billion yuan in 2019, and it is expected to reach 11.2 billion yuan (CAGR 26.5%) in 2024. The market scale of reproductive genetic reagents in 2019 was 2.8 billion yuan, and it is expected to reach 8.9 billion yuan (CAGR 26.2%) in 2024. With the change of family planning policy driven by the aging population, the rise of infertility rate and the increasing attention paid by the people to good prenatal and postnatal care, it is expected that the market size of reproductive genetic devices will continue to develop rapidly and a blue ocean market of tens of billions RMB will be formed gradually. Basecare embraces the development opportunity, and will achieve a virtuous circle by the core technology, the overall layout of the upstream and downstream and the advantages of capital resources.
Basecare’s elite team has a long-term vision, which continuously promotes the R&D of the product pipeline covering the full reproductive cycle. With the core advantages in PGT, Basecare positions itself as an innovative platform for gene testing solutions in assisted reproduction. Its product layout has covered both upstream and downstream of gene diagnosis in the assisted reproduction, namely reagents, instruments, and solutions. In terms of reagents, its products have covered the pre-pregnancy, pre-natal and post-natal phases. In addition to the original PGT kits, Basecare’s other PGD/PGS products are also leading in R&D and registration. In terms of instrument, Basecare introduces sample processing workstation and agent high-throughput sequencing instruments to match the core products. In the future, Basecare will build a comprehensive market system by the deep exploration in storage equipment and professional services. Among them, the intelligent liquid nitrogen storage dewar and cryostorage system received CE certification in May 2020, and it is expected to complete the domestic registration application and increase the volume quickly in 2022.
Investment suggestions: Basecare is a leader in assisted reproduction in China. Considering the competitive barriers, extensiveness and long-term growth potential, Basecare is valued as HKD 5.4 billion with reference to DCF valuation. We initiate our fist coverage with a “buy” rating and a HKD 20/share target price.