Event: the company achieved revenue of 590 million yuan in the first three quarters, + 98.6% year-on-year; net profit of 85.53 million yuan, + 98.4%; net profit of 81.4 million yuan, 88.5%; net operating cash flow of-37.65 million yuan,-221% of the same period last year. At the same time, the company forecasts a net profit range of 105 million-128 million yuan in 2016, a year-on-year increase of + 90% and 130%.
The performance of the parent company was lower than expected, and CRO continued its rapid growth trend. The company achieved income of 590 million yuan and net profit of 855.3 billion yuan in the first three quarters. Deducting the report of the parent company, it can be estimated that the revenue of the company's CRO business in the first three quarters is about 300 million yuan, the net profit contribution is about 80 million, and the annual performance commitment is about 75%. Considering that the CRO business generally accounts for a relatively high proportion in the fourth quarter, that is, the CRO business continues to grow rapidly, there are still expectations of exceeding the performance commitment for the whole year. From the perspective of the parent company, it is estimated that the preparation revenue in the first three quarters is less than 300 million yuan, and the net profit contribution is several million, that is, the preparation business performance is lower than expected. The main reasons are two aspects:
1) the company takes the initiative to adjust the sales method, the OTC channel revenue with low gross margin shows a downward trend, but the overall revenue quality of the company has improved; 2) financial expenses are still a drag on performance. Considering that the funds raised are in place and the products have won bids in several provinces, we believe that the performance of the parent company is expected to recover in 2017.
CRO has become the main business of the company's strategy and is a clear target for the benefit of the new drug policy. The CRO industry is at the core of the pharmaceutical R & D industry chain and is indispensable for new drug research and development. Benefiting from the conformance evaluation and the acceleration of new drug approval, the domestic CRO industry is expected to expand rapidly. The company strategically entered the CRO industry at the end of 2015. Shanghai Xinfeng, which is wholly owned, is a CRO enterprise that provides all-industry chain research services covering preclinical research and clinical research. The company has served more than 550 projects, of which more than 450 are innovative drug CRO projects. The report shows that the company has become one of the industry leaders in the field of innovative drug CRO services. Considering that Shanghai New Peak has planned, participated in and established the industrial alliance of GLP, GCP and GMP through the GRDP management system, and actively planned to establish a technical platform for consistency evaluation and a platform for medical research services and accurate medical technical services, which is a clear target for the benefit of new drug policies such as generic drug conformance evaluation and listing licensor system.
Profit forecast and investment advice. Considering that the growth rate of the preparation business is lower than expected, we have lowered our profit forecast. It is estimated that the EPS from 2016 to 2018 will be 0.45,0.68,0.87 yuan respectively, and the corresponding share price PE will be 72 times, 48 times and 37 times respectively. Considering that the performance of the parent company is expected to recover, the scalability of the new peak CRO business is strong and the company may store extension development expectations, we believe that the company's performance and valuation are expected to improve at the same time, maintaining the "buy" rating.
Risk hint: CRO business expansion may not be as expected, preparation or deposit price reduction risk, extension or lower than expected.
