Incident: The company released its 2022 annual report and the first quarter report of 2023. It achieved operating income of 424 million yuan in 2022, an increase of 30.68% over the previous year; the net profit of the mother returned to the mother was 27.67 million yuan, a decrease of 28.84% over the previous year; after deducting net profit of the non-return mother was 13.22 million, a decrease of 47.56% over the previous year.
The first quarter of 2023 achieved operating income of 103 million yuan, an increase of 39.25% over the previous year; the net profit of the mother was 11.74 million yuan, a decrease of 6.03% over the previous year; after deducting net profit of the non-return mother was 7.13 million yuan, an increase of 97.55% over the previous year.
Comment:
(1) Revenue in 2022 increased 30.7% year-on-year, and new orders increased 53%; various business segments grew briskly
The company's total revenue increased by 30.7% in 2022, of which revenue from clinical research services was 277 million yuan, up 38.63% year on year; revenue from preclinical research services was 73.72 million yuan, up 11.61% year on year; revenue from other consulting services was 40.77 million yuan, up 11.09% year on year; pre-clinical independent R&D revenue was 11.43 million yuan, down 4.75% year on year; revenue from technology achievement transformation services was 8.02 million yuan, up 100% year on year. In 2022, the amount of new orders signed by the company reached 843 million, an increase of 53% over the previous year. Among them, the amount of new clinical research service contracts was 631 million yuan, an increase of 5386% over the previous year; the amount of additional pre-clinical research service contracts was 144 million yuan, an increase of 129.03% over the previous year; and the amount of other consulting service contracts was added 68 million yuan, an increase of 36.83% over the previous year.
(2) New Chinese medicine registration regulations helped 2023Q1 increase 86% of new orders for traditional Chinese medicine over the same period last year. The amount of new 2023Q1 business contracts was 169 million yuan, a decrease compared to the same period last year. The main reason was that the progress of some of the projects under discussion has slowed down. The company quickly responded to the “Special Regulations on the Registration and Administration of Traditional Chinese Medicine” and closely communicated with customers and regulatory authorities, and signed a strategic cooperation agreement. The total number of new Chinese medicine orders for 2023Q1 was 60 million, an increase of 86% over the previous year. Orders for traditional Chinese medicine projects accounted for about 35% of the total number of contracts in the first quarter.
(3) “Asset impairment & personnel increase” dragged down profits in 2022, and growth gradually resumed in Q1 2023
In 2022, the company achieved net profit of 29.31 million yuan, a year-on-year decrease of 32.62%, mainly due to asset impairment and personnel increase. In terms of asset impairment, in 2022, due to inventory price drop losses and contract asset impairment losses, the company's asset impairment amount was 10.52 million yuan, accounting for 42.82 percent of total profit; in terms of labor costs, the total number of employees of the company in 2022 was 1186, an increase of 197 over 2021, resulting in a 60.42% increase in labor costs over the same period last year.
Profit forecast: We predict that the company's revenue in 2023-2025 will reach 607 million yuan, 850 million yuan, and 1,168 million yuan respectively, corresponding year-on-year increases of 43.24%, 40.12%, and 37.31%; the net profit of the parent mother is 507 million, 81 million, and 115 million respectively. The corresponding PE valuations are 65 times, 46 times, and 32 times, respectively. Considering the company's rapid growth, first coverage, the company was given a “recommended” investment rating.
Risk warning: Policy changes will affect new drug development investment and registration application progress, there is a possibility of contract extension and termination during the long new drug development process, and contract execution progress falls short of expectations