Main points of investment
The company announced its semi-annual report for 2020: the income was 608 million yuan, down 18.73% from the same period last year; the net profit from home was 85.07 million yuan, up 30.46% from the same period last year; the net profit from non-return was 64.95 million yuan, up 10.12% from the same period last year; and the net operating cash flow was 102 million yuan, up 4.84% from the same period last year.
The performance is basically in line with expectations, with strong growth of the two core products, levamlodipine benzenesulfonate and alpha ketoacid raw materials. In the single quarter of Q2, the net profit of realizing home return and deducting non-home net profit were 43.29 million and 36.79 million respectively (the difference mainly lies in government subsidies), with a year-on-year growth rate of 37% and 19% respectively, significantly faster than that in the first quarter, and the performance was basically in line with expectations. From a product point of view, the income of preparations reached 540 million yuan, down 3.49% from the same period last year, mainly due to the impact of the epidemic. The sales of some of the company's antibiotic preparation products declined in hospitals and clinics; the revenue from raw materials was 63.03 million yuan, down 65% from the same period last year. Jiangsu Yuexin's suspension of production mainly led to a decline in sales of intermediates and cephalosporins. However, the growth of the two core varieties of levamlodipine besylate tablets and α-ketoacid raw material drugs is strong, achieving income growth of 23.3% and 45.84% respectively. These two products are more profitable, so the net profit is still growing well in the face of declining income.
The low point of performance in 2019 has passed, and net profit is expected to grow at a compound annual rate of no less than 35% in the next three years.
From 2020 to 2021, after the consistency evaluation of the core varieties of preparation stock was passed, the volume of products was released. The resumption of production of Yuexin in Jiangsu Province brought about an improvement in the business of APIs and intermediates (the combined losses of intermediates and APIs were reduced by more than 50 million), and the output of the first phase of alpha ketoacid characteristic API climbed. After 2022, new preparations (alpha ketoacid tablets, etc.) were gradually approved (several times the income space opened), the second phase production capacity of alpha ketoacid characteristic raw materials was released (the production capacity was increased to 750t), and the company's income structure was greatly optimized.
Profit forecast and investment rating: the company's income from 2020 to 2022 is expected to be 1.6 billion yuan, 1.9 billion yuan and 2.5 billion yuan respectively, with a growth rate of 14.5%, 19.4% and 30% respectively, and its net profit from 2020 to 2022 is expected to be 162 million yuan, 220 million yuan and 296 million yuan respectively. the growth rate is 44%, 36% and 35% respectively, and the three-year compound growth rate of net profit is as high as 38%. It is estimated that the EPS of the company from 2020 to 2022 is 1.80,2.44,3.29yuan respectively, and the corresponding valuation of the current stock price is 37x, 27x and 20x, respectively. Considering company 1, the preparation business fully benefits from the consistency evaluation and the greater flexibility after the approval of the research products; 2, the revenue growth brought about by the resumption of production of Jiangsu Yuexin and the release of alpha ketonic acid production capacity, with reference to comparable company valuation and growth rate, maintain the "Buy" investment rating.
Risk tips: the company's product sales are not as expected; Jiangsu Yuexin's resumption of production is not as expected; the progress of product research and development is not as expected.
