RemeGen (SEHK:9995): Assessing Valuation After Shanghai Health Care Index Inclusion

RemeGen (SEHK:9995) has just been added to the Shanghai Stock Exchange Health Care Sector Index, a change that puts the biotech directly on the radar of sector trackers and index-linked funds.

See our latest analysis for RemeGen.

The latest index inclusion comes after a sharp run, with the year to date share price return of 468.99% and a 396.12% one year total shareholder return now giving way to softer short term momentum as traders reassess risk and future growth.

If RemeGen’s surge has you rethinking healthcare exposure, it could be worth exploring other healthcare stocks that might balance breakthrough potential with more stable performance profiles.

With the stock up nearly fivefold in a year and trading only slightly below analyst targets but at a sizeable discount to some intrinsic estimates, investors now face a key question: is there still a buying opportunity, or is the market already pricing in RemeGen’s next leg of growth?

Price-to-Sales of 17.3x: Is it justified?

RemeGen trades at a steep 17.3x price to sales multiple, well above peers, despite a last close of HK$76.7 that sits below some intrinsic estimates.

Price to sales compares the company’s market value to its trailing twelve month revenue, a common yardstick for high growth, loss making biotechs where earnings are still negative.

At 17.3x sales versus the estimated fair price to sales ratio of 14.1x, the market is assigning a substantial premium that assumes rapid growth will translate into future profitability and strong returns on equity.

The premium looks even more pronounced against the Hong Kong Biotechs industry average multiple of 12.4x, underscoring how aggressively investors are valuing each dollar of RemeGen’s current revenue.

Explore the SWS fair ratio for RemeGen

Result: Price-to-Sales of 17.3x (OVERVALUED)

However, the story could unravel if clinical timelines slip or recent revenue and earnings growth of 26.9% and 68.6% prove unsustainable.

Find out about the key risks to this RemeGen narrative.

Another View on Value

While the 17.3x price to sales ratio looks stretched against peers, our DCF model paints a different picture, suggesting fair value nearer HK$109.2 per share, around 29.8% above today’s HK$76.7 level. Is the market underestimating RemeGen’s longer term cash generation?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out RemeGen for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 908 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own RemeGen Narrative

If you reach different conclusions or want to dig into the numbers yourself, you can quickly build a custom view in under three minutes. Do it your way

A great starting point for your RemeGen research is our analysis highlighting 2 key rewards and 1 important warning sign that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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