Incidents:
The company released its 2021 annual report, achieving operating income of 3.463 billion yuan, +17.82% year on year; net profit of 428 million yuan, +17.36% year on year; net profit of 501 million yuan after deducting non-return mother net profit of 591 million yuan, -17.33% year on year; net operating cash flow of 705 million yuan, +517.62% year on year; and EPS 0.27 yuan. The performance is in line with market expectations.
Commentary:
Changes in R&D investment and fair value affected current profits, and the cash flow situation improved dramatically: 2021~Q4, the company's quarterly revenue was 434/9.16/7.79/1334 million, respectively, +286.45%/+98.63%/-21.53%/-2.82%; Guimo's net profit was 0.32/287/0.45/063 million yuan, +277.50%/+260.56%/-87.92%/-88.84%; after deducting net profit of non-attributable to the mother, 0.75/1.65/ 145/206 million yuan, +476.98%/+113.34%/-61.34%/-27.05% compared to the same period last year. The main driving force behind the company's revenue growth was sales revenue of 2,746 billion yuan for the 13-valent pneumonia conjugate vaccine, +65.59% over the same period last year, with 4.9508 million doses distributed in batches, +10.88% over the same period. Other vaccine varieties showed negative growth. It is estimated that the COVID-19 pandemic and large-scale vaccination of COVID-19 vaccines affected the vaccination rate of routine vaccines. The negative increase in profit was mainly due to the company's increased investment in R&D. The total R&D investment was 754 million yuan, +138.68% year on year, of which 621 million yuan was spent, +252.13% year on year; and profit and loss from changes in fair value - 281 million yuan. Among these, the biggest impact was the decline in the price of holding Jiahe Biotech shares, resulting in a fair value change income of 422 million yuan. The company's net operating cash flow situation improved dramatically, mainly due to a sharp increase in operating activity funds such as vaccine product sales refunds and project funding.
R&D projects are progressing in an orderly manner, and innovation drives future growth: In 2021, the company made every effort to promote clinical research and various products in the industrialization stage, and made positive progress. Some key projects include:
2-valent HPV vaccine: Clinical trial site and production site inspection work has been completed and included in the priority review variety list in July 2021, and related review and approval work is in progress; 9-valent HPV vaccine: all preliminary preparations for phase III clinical research are being carried out; COVID-19 mRNA vaccine: in phase III clinical research stage;
COVID-19 vector vaccine: in phase II clinical study; recombinant novel coronavirus vaccine (CHO cell): in phase II clinical study.
The company has deployed a number of cutting-edge technologies over the past year. In April 2021, the company signed an agreement with Shengnuo Biotech to cooperate to develop siRNA drugs for the common influenza virus; in August 2021, it signed an agreement with Blue Magpie Biotech to cooperate in the development of influenza virus mRNA vaccines and respiratory syncytial virus mRNA vaccines. The deployment of the world's cutting-edge siRNA and mRNA vaccine technology will further enrich the company's R&D technology routes and lay a solid foundation for long-term development.
Industrialization construction is progressing steadily, providing solid support for commercialization: the company's HPV vaccine industrialization project is designed and constructed according to WHO PQ pre-certification standards and other accepted international standards. Currently, the industrial production workshop has been completed; the International Vaccine Preparation Center completed system verification in December 2020, and will undertake production tasks for the export of products such as the influenza vaccine series vaccine and pneumonia series vaccine to the international market in the future; the “Beijing Watson Innovative Vaccine Industrial Park” construction project in Daxing District of Beijing has completed the main structure construction of plants No. 1 and 2, and the clean plant is being renovated ; The construction of the Watson Biotechnology Innovation Center project in Kunming High-tech Zone is nearing completion; a new mRNA vaccine modular plant was built in the Yuxi Vaccine Industrial Park, which was delivered to Yuxi Watson in September 2021, and equipment commissioning and verification work is continuing.
Profit forecast, valuation and rating: Considering that the company's R&D investment continues to increase and there is some uncertainty about changes in fair value, the net profit forecast for 2022-2023 was lowered to $1,199/1,874 million (the original forecast was $1,442/2,105 billion, down 17%/11%, respectively). The new forecast for 2024 was $2,363 million, an increase of 180.23%/56.34%/26.07%. According to the latest share capital estimates, EPS is 0.75/1.17/1.48, respectively Yuan, the current price corresponding to PE is 80/51/41 times, respectively. The company's new technology platforms, such as mRNA, have great potential, and are expected to open up international markets and maintain “buy” ratings in the future.
Risk warning: The approval progress of new varieties or sales are lower than expected; the risk of industry regulatory policy adjustments.