1H21 performance is in line with our expectations
The company announced 1H21 results: revenue of 50.16 million yuan, year-on-year increase of 55.95% 6; net loss of 42.09 million yuan, performance in line with our expectations.
Trend of development
1H21 revenue is growing rapidly and gross profit margin is significantly higher. The company achieved an income of 50.16 million yuan, an increase of 55.95% over the same period last year; the gross profit margin was 44.17%, an increase of 8.72ppt over the same period last year, which was significantly higher than that of the same period last year, mainly because the gross profit margin of PGT-A kit, the core product of 1H21 company, reached 71%, which led to an increase in the overall gross profit margin. In terms of business segments, the revenue of 1H21 testing kits was 40.4 million yuan, an increase of 73.47 percent over the same period last year, mainly due to a substantial increase in sales of PGT-A kits, CNV kits and NIPT kits compared with the same period last year; and revenue from testing equipment and instruments was 9.76 million yuan, an increase of 125.77 percent over the same period last year. In the context of encouraging fertility, be optimistic about the volume of the core product PGT-A. By screening for aneuploidy in embryos before implantation, the company's PGT-A kit increases the pregnancy rate to 72% and reduces the abortion rate to 6.9%. It is the first and only third-generation test-tube baby genetic testing kit approved by NMPA to achieve an income of 14 million yuan, a year-on-year increase of 168% and a gross profit margin of 71%, driving up the company's overall gross profit margin. As of 1H21, the company has signed cooperation agreements on PGT-A kits with 44 hospitals. With the increase in the number of fertility clinics licensed by PGT and the increase in the number of Bacon stationed in fertility clinics, we are optimistic about the company's PGT-A capacity.
Rich in research and development of pipelines, research and development continues to be high investment. The 1H21 R & D expenditure rate is 45.48%, which is higher than the same period last year. In addition to the approved PGT-A kits, the company is developing two other genetic testing products, PGT-M and PGT-SR, to jointly occupy the PGT field, and the company is expected to be approved in 2022 and 2024 respectively. In addition, the company has expanded its coverage to the prenatal and postpartum stages and is developing kits for all stages of the reproductive cycle. In addition to the kit, the company is also developing ultra-low temperature storage equipment and instruments.
Profit forecast and valuation
Keep the EPS-0.030.170.64 unchanged in 2021, 2022 / 2023. The current share price corresponds to 58.9 times 2022 / 2023 / 15.5 times earnings. Considering the systematic adjustment of the valuation of the pharmaceutical sector, the fundamentals of the overlay company are gradually stable, and the industry rating is maintained, we switch the valuation method to the PE valuation method. Considering that we may turn losses into profits in 2022, we use PE in 2023, and we lower the target price by 42.4% to HK $16.50, corresponding to 84.7 times 2022 price-to-earnings ratio and 22.3 times 2023 earnings ratio, which has 44.0% upside space compared with the current stock price.
Risk.
The product development failed, the clinical progress was not as expected, and the number of clinics licensed by PGT was lower than expected.