Performance review
1-3Q22's performance fell short of our expectations
The company announced 1-3Q22 results: revenue of 321 million yuan, +22.59% year on year; Guimu's net profit was 165 million yuan, +16.03% year on year; in the third quarter alone, the company achieved operating income of 106 million yuan (+0.09% YOY) and achieved net profit of 53.79 million yuan (-12.86% YOY). The performance fell short of expectations, mainly due to the impact of the COVID-19 pandemic on production.
Development trends
Sales of products and technical services are growing steadily. In 1H22, the company's product sales business achieved revenue of 190 million yuan (+33.3% YOY), and the technical service business achieved revenue of 0.3 billion yuan (+109.7% YOY), mainly due to the increase in order volume brought about by continuous product launches from domestic downstream customers.
In 1H22, the company's foreign sales revenue was 110 million yuan (+23.4% YOY), mainly due to the steady increase in orders for medical device-side products from abroad and the increase in product usage brought about by the advancement of clinical research and development progress of overseas downstream pharmaceutical R&D customers.
Investment in R&D is growing rapidly, and ongoing research projects are progressing smoothly. 1-3Q22, the company's R&D expenses were 61.39 million yuan (+68.97% YOY), growing rapidly, mainly due to (1) the increase in R&D investment such as outsourced R&D expenses and material consumption due to the promotion of R&D projects; (2) the number and remuneration of R&D personnel increased as the company continued to train R&D talents and build R&D teams; and (3) the amount of share payments included in R&D expenses in the equity incentive plan. Currently, the company continues to step up the independent research and development of polyethylene glycol irinotecan, JK-2122H, and JK-1119I projects, while also actively laying out other R&D pipelines.
Entering a new round of production capacity building period. In 2021/1-3Q22, the company's fixed assets were 129/136 million yuan respectively, and the projects under construction were 806/144 million yuan respectively. Entering a new round of production capacity construction period, the IPO fund-raising project, Liaoning Jiankai, is under construction. The company expects 4Q22 to be delivered and trial production, and officially put into operation in early 2023.
Profit forecasting and valuation
We maintain the company's 2022/2023 EPS of 3.94/5.43 yuan. The current stock price corresponds to 2022/2023 PE by 42/31 times. We maintain that the company outperforms the industry rating and target price of 197.10 yuan (based on the DCF model), which corresponds to the 2022/2023 PE 50/36 times. Compared with the current stock price, there is room for an increase of 18.5%.
risks
Risk of failure in R&D of innovative pharmaceutical products; risk of iteration of core technology; risk of US international trade protection.