On March 28, the company released its semi-annual report 2020, with revenue of 110 million yuan in the first half of 2020, an increase of 17.93% over the same period last year, and a net profit of 11.875 million yuan, an increase of 303.23% over the same period last year. The net profit after deducting non-return was 8.9916 million yuan, a substantial increase of 581.16% over the same period last year. Basic earnings per share is 0.05 yuan.
Main points of investment:
Company profile. The company was founded in 2002 and listed on Shenzhen gem in 2015, specializing in CRO services, clinical research services is the company's main source of income and profit. In the first half of 2020, clinical research services accounted for 47% of the company's main business revenue. In addition, the company's business also covers preclinical independent research and development business, preclinical service business, technology achievement transformation service and CDMO business, as well as technical consulting services such as research scheme design, data management, data statistical analysis, Sino-US double newspaper business and so on. In 2018, the company obtained the GLP laboratory certification.
Affected by the epidemic in the first quarter, the main reasons why the company's performance continued to grow in the first half of 2020 were: 1) the improvement in preclinical business; 2) the increase in technology transfer; the increase in gross profit margin is mainly due to the increase in the proportion of the company's high gross margin technology transfer business, and the amount of revenue from each technology achievement conversion service contract varies greatly due to the technical difficulty and innovation degree of each technology achievement. In addition, the number of technological achievements transformation service projects successfully completed by the company is different each year, so the income fluctuates; the company's financial expense rate has increased, mainly due to the increase in the payment of interest on bank loans; the decline in the management expense rate is mainly due to the subsidiary Science and Technology Parks Corporation business, and depreciation is apportioned to the project, resulting in a decrease in management expenses. The rate of R & D expenditure continues to rise.
The influence of 722 basically subsided. Affected by the announcement on self-examination and Verification of Drug Clinical trial data issued by the State Food and Drug Administration (CFDA) on July 22, 2015 (known as "the strictest data verification requirement in history", the incident is known as "2015 tragedy"), the company's clinical business has been adversely affected. At present, the impact of this incident has been basically eliminated, and 18 projects of the company have been subject to on-site verification since 2015. And finally passed In the first half of 2020, the company also assisted customers to achieve on-site verification of six clinical services of drugs and medical devices, and was approved to go on the market. In recent years, the company has increased its investment in independent R & D projects, the construction of science and technology parks, GLP laboratories, innovative drug research and development centers, and the implementation of equity incentives, during which the expense rate has increased, which has affected the growth of the company's net profit in recent years, but the company's revenue growth is still rapid (see figure 1).
Clinical trial business recovered in the third quarter. Affected by the epidemic in the first half of the year, the company assisted customers to complete the verification of six drugs and medical devices; the impact was gradually fading in the third quarter and has now returned to about 70%-80% of normal business.
There are plenty of orders on hand. The new contract value in the first half of 2020 was 230 million yuan, an increase of about 13% over the same period last year. At present, the company has an order of 1 billion yuan and serves more than 60 innovative drugs and medical device projects, of which there are more than 40 in the IND phase of NMPA and FDA and more than 20 in the clinical stage. generally speaking, the later the progress of drug research and development, the larger the contract amount for CRO services. take the Ⅲ phase clinical contract of a chronic hepatitis B drug signed by the company last year as an example, the total amount of the project is 98 million. It is expected that the project that the company is currently working on will bring considerable orders to the company when it enters the next stage. In the later stage, the company will increase its market expansion efforts in order to bring about a sustained increase in orders.
Benefit from the rapid growth of the CRO industry. According to public data, the market size of the global CRO industry reached US $57.8 billion in 2018, including US $11.5 billion for drug discovery, US $8.4 billion for preclinical CRO and US $41.9 billion for clinical CRO. In recent years, the market share of the three major segments classified by R & D process has basically remained stable. It is estimated that by 2023, the size of the CRO industry will reach US $95.1 billion, and the CAGR of 2018-2023 will reach 10.47%. The domestic CRO business started relatively late, and the domestic CRO market is close to US $5.8 billion in 2018, including US $1.1 billion for drug discovery, US $1.5 billion for preclinical CRO and US $3.2 billion for clinical CRO. Benefiting from the cost advantages brought by the outsourcing of the global pharmaceutical industry chain and the dividends of domestic engineers, the domestic CRO industry has maintained a high growth trend in recent years, with CAGR reaching 29.2% from 2014 to 2018. It is expected that the market size will reach US $21.4 billion by 2023; considering the volume procurement, consistent evaluation forces enterprise transformation, and policies encourage the development of innovative drugs, China's innovative drug industry shows an accelerated development trend, the CRO industry will continue to maintain rapid development, and the company expects CAGR to reach 29.6% from 2018 to 2023. As a member of the CRO industry, the company will also benefit from it.
The company has new CDMO business and perfect industrial chain. CDMO business includes process magnification, experimental drug use, simulant research and production, project registration, incubation operation, project investment and other services; the company will provide integrated services from preclinical research to production. At present, the company has built part of its CDMO production capacity and has not yet made a profit. Once it can run smoothly, the speed of transforming income is faster.
Strengthen the construction of preclinical research team and pharmacology and toxicology. In 2019, the company introduced Wang Jianhua, an expert in R & D of Mingkang de, to build the company's innovative drug R & D team, mainly in the field of liver disease and tumor. at present, the team has more than 20 people in the field of liver disease and tumor. in the future, the company will achieve revenue through technology transfer and equity cooperative research and development; in addition, the company is also strengthening pharmacology and toxicology construction, with an animal room of about 3000 square meters, and the business is expected to be further promoted in the future.
A brief introduction to Ding Zeng. The company intends to issue no more than 67603380 shares to no more than 35 specific objects, with a total fund of not more than 343.203 million yuan, and invest in contract R & D and production organization (CDMO) platform construction projects, innovative drug R & D service platform construction projects, clinical research service network expansion and capacity enhancement projects and supplementary liquidity. After the project reaches production, the company's competitiveness in the fields of oncology, digestion and liver disease will be further enhanced.
Profit forecast and risk hint. Without considering the additional issuance factors, the company is expected to earn 0.12 yuan per share in 2020, 0.15 yuan per share in 2021 and 0.17 yuan per share in 2022, corresponding to the closing price on September 22nd, the dynamic price-to-earnings ratio is 106.3 times, 85.1 times and 75.1 times, respectively. Give the company an investment rating of "increasing holdings".