Recommendation logic: After the merger and acquisition of Wisdom Chemical in 2018, Quantum Biology entered the pharmaceutical outsourcing industry and became one of the leading companies. The original microecological health business segment grew steadily, and the company's future performance is expected to grow rapidly under the dual business. Performance is now at a marginal inflection point. Wisdom Chemical's performance is outstanding after the merger: benefiting from Wisdom Chemical's merger, the company's estimated 2018 revenue is 1,410 billion yuan (+411.9%), and net profit is 91 million yuan (+230.0%). Wisdom Chemical is a top biomedical R&D outsourcing company, and its preclinical CRO business for chemicals and biopharmaceuticals ranks in the top three in China. The company's main advantage is that it is based in China, faces the world, and integrates various capabilities in the industrial chain and technical human resources at home and abroad. It is expected that Smart Chemical will continue to benefit from the rapid development of the pharmaceutical CRO industry and maintain rapid growth in the future. Overseas markets: According to the Southern Institute's forecast, global CRO sales will reach US$35 billion in 2017, and global CRO sales will reach US$47.9 billion in 2021, with an average compound annual growth rate of 8% over the period. High local R&D and operating costs have become a burden for multinational pharmaceutical companies, while China's research expenses are only 30%-60% of developed countries, which has a cost advantage, so global pharmaceutical R&D activities are shifting to China and other low-cost countries. On the domestic market side: China's pharmaceutical companies are in the historical stage of strategic transformation from “generic drugs” to “innovative drugs”. China's CRO market sales will reach 55.9 billion yuan in 2017 and 116.5 billion yuan in 2021, with a compound annual growth rate of 20% during this period, and China's CRO industry will develop by leaps and bounds. As one of the largest CRO companies in China, we believe Wisdom Chemical will benefit from the rapid development of the industry. The microecological health sector has broad prospects for the future: Quantum Hi-Tech before the merger and acquisition of Smart Chemical is one of the few prebiotic companies in the world that have mastered core technologies in the entire industry chain, such as enzyme engineering, strain selection, process development, analysis and testing. The main products include microecological nutritional products such as galactose oligosaccharide and oligofructose. While meeting people's demand for sugar, it can provide healthier methods such as “sugar reduction, high fiber, and intestinal immunity” to promote the growth of beneficial bacteria. This is a new breakthrough point in the health industry. Customer development needs have not yet begun, and there is great potential for growth. Profit forecast and investment advice: As a leader in the CRO industry, Wisdom Chemical benefits from the rapid development of the global industry. Future performance is expected to maintain rapid growth, and the company's original biotech business also has broad prospects. We expect the company's EPS for 2018-2020 to be 0.32 yuan, 0.52 yuan, and 0.72 yuan, respectively. Since the company involves two parts of the business of pharmaceutical outsourcing and prebiotic production, we value it by segment. Referring to the 2019 average valuation of comparable companies, Wisdom Chemical was given 50 times PE and Quantum Hi-Tech 21 times PE. In total, Quantum Biology had an overall valuation of 11.6 billion yuan, corresponding to the target price of 23.2 billion yuan. First coverage, giving a “buy” rating. Risk warning: mergers and acquisitions integration or failure to meet expectations, prebiotic market expansion or failure to meet expectations, CDMO project production progress or failure to meet expectations, and Smart Chemical's performance falls short of promises.
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量子生物(300149):微生态健康与CRO双轮驱动 未来业绩有望高速增长
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