Main points of investment: pay attention to the technology and product upgrading process of domestic steroid drug industry
Steroid hormone drugs are the second largest class of drugs in the world after antibiotics. China is the largest production and supply base of steroidal APIs in the world. At present, the annual output of steroid drugs in China accounts for about 1 / 3 of the world's total, and its production capacity and actual output rank first in the world.
Break through the key technologies of 4-AD and lead the upgrading of domestic steroid drug production path. Seito Biology, founded in 2010, is the leader in the key intermediates of the new generation of steroid drugs. Around 2012, the company quickly conquered the production process of androstenedione (4-AD), the core raw material of steroid drugs, with the help of technology accumulation in the field of genetic engineering and microbial transformation, and developed a series of intermediate products on this basis. Compared with the traditional intermediate diosgenin / diene, androstenedione (4-AD) and similar products have outstanding advantages in environmental protection and cost, so they have been rapidly promoted and have accounted for 2/3 of the production of steroid drugs.
The outbreak of terminal demand has also led to a rapid increase in the scale of the company's business. From 2013 to 2015, sales of androstenedione, the company's core product, increased from 154 tons to 722 tons, and sales of hydroxyprogesterone increased from 91 tons to 184 tons. Product prices are expected to gradually stabilize, and new categories will drive future growth. Since 2016, the company's business has begun to face greater competitive pressure. In the first half of the year, the company's operating income and net profit decreased by 21.69% and 52.95% compared with the same period last year. We believe that the decline in the company's profits this year is mainly due to: 1) the entry of substitutes 9-hydroxyandrostenedione and its derivatives into the market, resulting in a decline in the market price and market demand for androstenedione products; 2) a significant drop in the sales price of core products.
In the future, we believe that the company's profits have the potential to gradually stabilize and pick up: 1) the process route of androstenedione (4-AD) has gone through the stage of rapid decline in cost and price at the initial stage of development, and the price trend is expected to be relatively stable in the future. 2) the company is also speeding up the large-scale mass production and market promotion of 9-hydroxyandrostenedione and its derivatives 4-alkenes and medroxyprogesterone, and shows remarkable results. In the future, with the further expansion of the production scale of the company's 9-hydroxyandrostenedione and its derivatives, the purchase volume of downstream customers will further increase, helping the company to maintain its leading position in the subdivision field.
Profit forecast and investment advice. Considering the issuance of 26.67 million shares by IPO, we expect the EPS to be 1.02,1.06,1.15 yuan in 2016-18 years after the issue. The offering price of the company is 40.29 yuan per share, corresponding to 39 times of PE in 2016, considering that the company is the leader in the subdivision of steroid drugs in China, while the market capitalization of small market capitalization companies in A shares is generally higher, we give the company 50-60 times PE in 2016, corresponding to a share price of 51-61.2 yuan per share.
Risk hint. 1) the emergence of substitutes for steroid drug raw materials, and the intensification of competition in the industry; 2) the risk of product price decline; 3) the risk of excessive concentration of downstream customers.
