The company is a first-class supplier of characteristic APIs in China, with good revenue and profit growth. The company is a pharmaceutical manufacturing enterprise specializing in the research, development, production and sales of characteristic APIs and finished drugs, with core products covering cardiovascular, central nervous system, gastrointestinal tract and other treatment fields. From 2016 to 2020, the company's total operating income increased from 578 million yuan to 1.194 billion yuan, with a CAGR of 19.87%. The company's net profit increased from 78 million yuan to 167 million yuan, with a CAGR of 20.71%.
The demand for characteristic raw materials is expected to maintain steady growth in the future. According to Evaluate Pharma, patented drugs with sales of nearly $160 billion will expire between 2020 and 2024. Based on the fact that the price of generic drugs is about 10% of patented drugs, the alternative space for generic drugs in the past five years is about US $160-32 billion. The expiration of a large number of patented drugs will stimulate the continuous growth of the generic drug market and lead to the expansion of the market scale of characteristic APIs. The development of economy, the trend of social aging and the increasing demand of public health awareness will promote the steady growth of global demand for characteristic APIs.
The production layout of the company is reasonable, and the production capacity is expected to be released gradually. The company has been deeply engaged in the API industry for many years and has four API production bases, covering production capacity ranging from 50L to 10000L. The existing cGMP standard reactor has a total volume of 2200 cubic meters. With the gradual commissioning of the company's new API production capacity, new customers and new projects will further increase, laying the foundation for the future growth of the company's performance.
Accelerate the layout of new CDMO business and build future performance growth points. In the first half of 2021, the company achieved a total CDMO business sales revenue of 106 million yuan, an increase of 113.40% over the same period last year. In April 2021, the company signed a 10-year CDMO strategic cooperation agreement with Merck & Co Inc, a large multinational pharmaceutical company, in the fields of pet medicine, veterinary medicine and animal health. This strategic cooperation reflects Merck & Co Inc's full recognition of the company's R & D technology, production and quality in the field of API, has a far-reaching and significant impact on the development of the company, especially the development of the new business of CDMO, and further enhances the company's international competitiveness in the field of CDMO.
Investment suggestion: the company's earnings per share in 2021 and 2022 are expected to be 1.02 yuan and 1.21 yuan respectively, and the corresponding valuation is 33 times and 27 times respectively. The company is a first-class supplier of characteristic APIs in China, with core products covering cardiovascular, central nervous system, gastrointestinal tract and other treatment fields. With the gradual commissioning of the company's new API production capacity and the expansion of CDMO business, the company's future growth can be expected. Cover for the first time, giving the company a "cautious recommendation" rating.
Risk tips. Risk of product quality control, risk of production safety and environmental protection, risk of product research and development not up to expectations, etc.