Is HBM Holdings (SEHK:2142) Fully Valued After Its Asthma IND Approval?

HBM Holdings (SEHK:2142) is in focus after China’s National Medical Products Administration approved the Investigational New Drug application for HBM7575/SKB575, a long-acting bispecific antibody candidate for asthma co-developed with Kelun-Biotech.

See our latest analysis for HBM Holdings.

The IND approval appears to have reinforced interest in HBM Holdings, with the HK$11.96 share price supported by a 9.72% 1 month share price return and a very large 3 year total shareholder return, even though the 90 day share price return is down 15.42%.

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With HBM Holdings up 9.72% over the past month yet still showing a 15.42% decline over 90 days, how much of this move appears tied to the asthma IND milestone versus a change in sentiment, and what does the current valuation suggest?

Price-to-Earnings of 14.5x: Is it justified?

HBM Holdings last closed at HK$11.96, and on a P/E of 14.5x it screens as lower priced than many peers. However, other checks suggest the market may be paying up versus its own fair level.

The P/E multiple compares the current share price with earnings per share, so it reflects how much investors are willing to pay today for each unit of current earnings. For a profitable biotech like HBM Holdings, which already reports HK$91.33 million in net income and a 57.8% net margin, this ratio gives a quick sense of how the market values its earnings relative to other biopharma stocks that may still be loss making.

On one side, HBM Holdings is flagged as good value versus similar companies, with its 14.5x P/E below both the peer average of 47.6x and the Asian biotech average of 31.2x. On the other side, the fair P/E estimate sits lower at 10.2x, and the SWS DCF model indicates the current HK$11.96 price is above a future cash flow value of HK$9.22. There is therefore a clear gap between what regression-based fair value work and cash flow-based valuation suggest the multiple could move toward and where the market is currently trading.

Explore the SWS fair ratio for HBM Holdings

Result: Price-to-Earnings of 14.5x (OVERVALUED)

However, this picture for HBM Holdings still carries risks, including clinical or regulatory setbacks in its antibody pipeline and any cooling of investor interest in higher P/E biotech stocks.

Find out about the key risks to this HBM Holdings narrative.

Another View on HBM Holdings: Cash Flows Send a Different Signal

While HBM Holdings looks inexpensive on a 14.5x P/E against peers, the SWS DCF model paints a tougher picture. The HK$11.96 share price sits above an estimated future cash flow value of HK$9.22. That points to a stock that screens as overvalued on cash flows, so which signal should you give more weight to?

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 HBM Holdings 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 232 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

With sentiment on HBM Holdings clearly mixed, given both flagged risks and rewards, it makes sense to review the underlying data and decide where you stand. You can start with the full breakdown of 2 key rewards and 2 important warning signs

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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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