Performance summary: in the first three quarters of 2020, the company achieved operating income of 4.87 billion yuan (+ 21.4%), net profit of 840 million yuan (+ 64.2%), and non-return net profit of 780 million yuan (+ 109.6%). Among them, the income in the third quarter was 1.57 billion yuan (+ 15.2%), the return net profit was 260 million yuan (+ 48%), and the non-return net profit was 240 million yuan (+ 125s.9%).
Collection of mining volume and CEP certificate recovery, driving the rapid growth of performance. On a quarterly basis, 2020Q1/Q2/Q3 's quarterly operating income was 1.74 billion yuan, with a year-on-year growth rate of + 31%, 19.3%, 15.2%, and net profit of 2.2 million, respectively, with a year-on-year growth rate of + 62.7%, 79.6%, 48.1%, respectively. The company's performance has increased rapidly for three consecutive quarters, mainly due to: 1) with the promotion of national centralized procurement and relying on the opportunity of selection in the enlarged alliance area, the product market coverage has increased rapidly, resulting in a substantial increase in domestic preparation sales; 2) the restoration of the CEP certificate of sartan products has led to a substantial increase in the sales of the company's API products. 3) sales growth leads to the expansion of production scale, diluting production costs to a certain extent and driving profit growth. In addition, as an important producer of APIs in the world, the COVID-19 epidemic continues to worsen, which may cause orders for APIs to spill over to China, which is good for the company's API business.
Profitability continues to improve, and R & D projects are progressing smoothly. In the first three quarters, the company's gross profit margin was 63.8% (+ 4.5%), net profit rate was 18.2% (+ 4.7%), and profitability reached a new high. In the first three quarters, the fourth rate was 41.3% (- 4.4pp), of which sales rate, management rate and R & D rate were 16.2% (- 2.7pp), 14.2% (- 1.8pp) and 7.8% (flat), respectively. The R & D expenditure rate remained at a high level. In the third quarter, the company's research and development progressed smoothly: 1) in terms of NMPA approval, olanzapine disintegrating tablets were approved to market, further enriching the company's product line; 2) in terms of FDA approval, the preparation product methylphenidate hydrochloride tablets were approved and gradually entered the field of regulatory products in the United States. 3) in terms of clinical trial approval, 3, 1 and 2 new indications clinical trials were approved for HB002.1M injection project, HOT-1030 injection project and HB0017 injection project respectively. The company has 66 American ANDA batches and 22 products have passed the consistency evaluation, laying the foundation for the long-term development of the preparation business.
Profit forecast and investment advice. Considering that the variety collected by the company is expected to be expanded, the restoration of CEP certificate for sartan products leads to a substantial increase in sales of APIs, and the scale effect continues to manifest. The profit forecast for 2020-2022 shows that the EPS is 0.79,1.10 and 1.44 yuan respectively, and the corresponding PE is 43 times, 31 times and 23 times respectively. Maintain the "hold" rating.
Risk hints: API price fluctuation; collection winning bid is not as expected; exchange rate fluctuation risk.