Healthcare shares are deemed the most overvalued and bank ones most undervalued stocks in South Korea, according to the Korea Exchange.

The price-to-earnings (P/E) ratio, or earnings multiple, of the healthcare sector was the highest among major sectors at an average of 91.78 as of the end of December last year. IT and software category stood at 39.56, consumer discretionary at 19.47, consumer staples at 18.60, construction at 15.33, and steel at 14.39.

The P/E ratio measures a company’s current share price relative to its per-share earnings. A company with a P/E ratio higher than the industry average suggests the stock may be overvalued as the share price is relatively high compared to its earnings.

The P/E ratio of healthcare showed a marked jump in the recent year, shooting above 90 last year from 23.74 in 2016.

Among the drivers was Korea’s top biosimilar manufacturer Celltrion Inc. whose stock traded 112 times its earning as of Monday. The surge was partly due to its upgrade earlier this month from the secondary Kosdaq to the benchmark Kospi, where it instantly became the third largest stock. Its marketing affiliate Celltrion Healthcare Co., listed in the Kosdaq market, showed a ratio of 91.

Celltrion currently sells Remsima, Truxima and Herzuma, its flagship copycat versions of blockbuster biological drugs, across the world. The company’s development of a new pneumonia vaccine is under development.

Local pharmaceutical leader Hanmi Pharm posted a P/E ratio of a staggering 450 as of Monday, although its shares fell more than 8 percent on news that clinical trials for one of its new drug candidates had been halted. Its stocks slightly recovered on Tuesday, trading at 505,000 won, up 2.02 percent from the previous session. The company’s stocks have enjoyed attention in recent years after it has successfully licensed out a number of its novel drugs.

Meanwhile the banking sector showed the lowest P/E ratio at 7.68. Insurance followed with 10.59, broadcast and communication with 10.82, energy and chemicals with 10.87, and semiconductors with 11.60.

Analysts say the banking sector’s share price does not seem to fully reflect its record earnings last year. The semiconductor sector, despite all-time high profits of leading chipmakers Samsung Electronics Co. and SK Hynix Inc. last year, also saw its P/E ratio fall to 11.60 from 16.85 in 2016.

By Shin Heon-cheol and Kim Hyo-jin

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