Biosensors

Biosensors: 1QFY14 net profit of US$12.1m (-63% yoy) was significantly below expectations. Revenue declined 11% yoy to US$76.6m, while gross profits dropped 17%. The results were adversely affected by inventory drawdowns across its channels in China in view of looming price cuts, resulting in DES revenues declining 6% yoy. Licensing revenues from Japan were also down 33% yoy. Deutsche sees further erosion in royalty income in FY14, given continued competition in Japan, in particular, Abbott launched its Xience Xpedition in Japan in Jul. Expects further margin erosion due to, i) increasing costs in Japan, ii) integration of acquired business, and ii) increase sales and marketing costs. Deutsche lowers TP to $1 (from $1.15), based on 13x FY15e P/E. Maintains Hold rating. OCBC downgrades to Hold from buy, slashes TP to $0.96 from $1.60. Expects some near term selling pressure. CS cuts TP to $1.43 (from $1.80), but maintains Outperform rating. Nomura keeps at Buy with TP $1.80.