Performance in 2021 is lower than we expected.
The company announced its 2021 results: revenue of 107 million yuan, an increase of 32.29% over the same period last year, and a net loss of 144 million yuan. The lower-than-expected performance in 2021 was mainly due to the lower-than-expected penetration of the company's third-generation test-tube babies.
Trend of development
Income continued to grow in 2021, with a significant increase in gross profit margin and core product income. The company's 2021 revenue was 107 million yuan, an increase of 32.29% over the same period last year; gross profit was 51.15 million yuan, an increase of 85% over the same period last year; gross profit margin was 47.67%, of which PGT-A gross profit margin increased to 70.0%, leading to an increase in overall gross profit. According to the business segment, the revenue of the testing kit plate was 91.87 million yuan, an increase of 46.76% over the same period last year, mainly due to the further improvement in sales of PGT series kits, and the revenue of testing equipment and instruments was 15.43 million yuan, an increase of 26.68% over the same period last year.
The process of commercialization of core products continues to advance, with cooperation signing + marketing input + capacity upgrading enabling development. The revenue of the company's core PGT series segment was 45.84 million yuan, an increase of 41% over the same period last year, accounting for 43% of the total revenue Prida, contributing more than 50% to revenue growth, of which PGT-A gross profit was 23.73 million yuan, an increase of 99.2% over the same period last year.
The commercialization of the company's core products has further achieved remarkable results. In 2021, the company signed a contract with 55 domestic head assisted reproductive centers, and now has 48 localization laboratories, with a market share of 70%. In 2021, the company invested 62.62 million yuan in marketing, an increase of 276% over the same period last year; the number of marketing personnel expanded to 130, strengthening the construction of localized services and the all-round development of service products and pipelines. The company is steadily building its own sales channel barriers and core competitiveness. At the same time, the foundation of the R & D building and production base with a total area of more than 50,000 square meters will further enhance the company's production capacity and technology research and development.
Continuous high-level investment in research and development, product pipeline and technology research and development in an all-round way. In 2021, the company invested 73.71 million yuan in R & D, an increase of 114% over the same period last year. The PGT-M kit will start clinical trials in 2021, and the company expects to complete the group in 2022; the PGT-SR kit will be completed in 2021 and the company will be certified in 2022. In 2021, we will complete the acquisition of 51% of Xingbo Biology, expand the layout of the andrology industry, and help the company's industrial extension strategy. Remarkable achievements have been made in the multi-line layout of instruments and pipelines in 2021: DA500 gene sequencer and BCT38 intelligent liquid nitrogen tank have been verified, and the company is expected to be certified in 2022; BSG800A cryogenic storage instrument has been commercialized; BKA210 intelligent sperm quality analyzer is expected to be certified in 2023. The company's product pipeline research and development and registration process is steadily moving forward to further achieve the strategic goal of large-scale delivery and covering the whole industry chain.
Profit forecast and valuation
Considering that the penetration rate of the company's third-generation IVF is lower than expected, we reduce our 2022 revenue by 48.4% to 224 million yuan, and introduce 2023 revenue of 327 million yuan. Taking into account the systematic adjustment of the pharmaceutical sector, we maintain an outperform industry rating. Based on the decline in revenue, the increase in expense rate and the negative net profit, we switch to the forward price-to-earnings ratio valuation method. We lower the target price by 66.0% to HK $4.49, which is 15.1% higher than the current stock price, and the target price corresponds to 2026 PE19.7 times.
Risk
The product development failed, the clinical progress was not as expected, and the number of clinics licensed by PGT was lower than expected.