Key points of investment
Matters:
The company announced its 2019 performance report, achieving revenue of 1,706 million yuan, an increase of 29.06% over the previous year; net profit of 276 million yuan, an increase of 24.68% over the previous year; and 2019 EPS of 0.22 yuan. The company's performance was in line with expectations.
Among them, revenue for the 2019Q4 quarter was 562 million yuan, an increase of 76.88% over the previous year, and net profit of 54.89 million yuan, an increase of 417.54% over the previous year.
Peace view:
The company's main business performance was outstanding: in 2019, the company achieved net profit of 276 million yuan (+24.68%), which is in line with overall expectations. The company announced that at the end of 2019, 430 million financial resources were overdue for payment. We estimate that in 2019, about 30 million bad debts were recorded, and actual net profit exceeded 300 million yuan. Referring to the amount of non-recurring profit and loss in 2018, we expect the company's net profit not attributable to parent to be about 210 million yuan in 2019, an increase of about 94% over the previous year, and the company's main business performance is impressive.
The main business categories maintained a good growth momentum: in 2019, the company achieved a total revenue of 1,706 million yuan (+29.06%), and the growth momentum is good. Among them, the estimated revenue of heparin sodium raw materials is close to 800 million yuan, with a growth rate of more than 20%, mainly due to the continued rise in prices. Sales volume of heparin sodium injections is expected to remain the same. Judging from the sample hospitals, the average price of a single dose reached 7 yuan, with total revenue of about 160 million yuan (+40%), but considering rising costs, gross profit is expected to remain stable. Low molecular weight heparin has maintained a rapid release trend. In 2019, sales volume is expected to exceed 3 million units, with sales exceeding 100 million yuan. Yikai and Yimei are growing steadily, with total revenue expected to be close to 700 million yuan. With the promotion of the OTC side, the penetration rate will continue to increase.
ZHB202 has been clinically approved again, and the innovative drug layout continues to be rich: Following QHRD107, the first class 1 new drug in July 2018, ZHB202 received clinical approval again in November 2019, and the company's dark horse for innovation is evident. Currently, the company has a macromolecular drug research and development platform with Zhonghong Biotech as the main body and a small molecule drug research and development platform with Innoshengkang as the main body. In addition to the ZHB202 project, which has been approved for clinical trials, the ZHB206 project has also completed all non-clinical studies and is expected to apply for clinical trials in 2020. Meanwhile, InnoShengkang LS010 has also basically completed the pre-clinical research stage and is expected to be submitted for clinical use soon. The company's innovative drug pipeline continues to be rich.
Profit forecast and investment rating: The company's main business maintained outstanding performance, and the high proportion of majority shareholders participating in the employee stock ownership plan in 2019 showed confidence in future development. Therefore, we slightly adjusted the company's profit forecast. We expect the EPS for 2019-2021 to be 0.22 yuan, 0.28 yuan, and 0.35 yuan respectively (the original forecast was 0.22 yuan, 0.26 yuan, and 0.32 yuan). The current stock price corresponds to only 17 times the company's PE in 2020, maintaining the “recommended” rating.
Risk Reminder: 1) R&D Risk: New drug research and development is a high-risk, high-benefit act. It requires multiple steps such as pharmacology, toxicology, pre-clinical, and clinical trials, and there is a possibility of failure; 2) Risk of bad debt: At the end of 2019, the company's financial management was overdue, and there is a risk of further calculation of bad debts in the future. However, if it is successfully recovered, the calculated portion will be added back to net profit; 3) Risk of heparin API price fluctuation: API prices are volatile. Although the share of the business is already low, if the price of heparin APIs falls, it will still affect the company's revenue and profit volume.