Events:
Recently, the company released three quarterly results for 2020: in the first three quarters of 2020, the company achieved operating income of 3.542 billion yuan, an increase of 12.85% over the same period last year; net profit of 709 million yuan, up 5.56% over the same period last year; and net profit of 606 million yuan, up 173.00% over the same period last year.
Point 1: the adjustment of customer procurement rhythm affects the current performance. The long-term competitive advantage of the whole industry chain highlights that in the third quarter of 2020, the company achieved operating income of 883 million yuan, net profit of 128 million yuan, and non-return net profit of 101 million yuan, which decreased by 12.5%, 2.1% and 35.0% respectively over the same period last year.
We believe that the continued high operation of heparin API prices and the adjustment of customer procurement rhythm in the third quarter caused obvious short-term fluctuations in the API business, and the superimposed depreciation of foreign currencies and other factors dragged down the company's Q3 performance to a certain extent, with a significant decline in net profit compared with the previous quarter.
In terms of business, API business, the revenue of the company's API business in the first three quarters was 1.797 billion yuan, an increase of 6.0% over the same period last year, and the gross profit margin increased by 8.3% to 43.6%. With the relief of the overseas epidemic, customer demand will return to normal procurement.
In the preparation business, the company continued to optimize the sales channel structure, the volume and price of the preparation business rose, and the revenue and gross profit margin of enoxaparin sodium preparation further increased. During the reporting period, the company's preparation business income was 928 million yuan, an increase of 28.7% over the same period last year. Gross profit margin was 45.0%, an increase of 1.8%.
For CDMO business, revenue reached 579 million yuan during the reporting period, an increase of 16.0% over the same period last year, and gross profit margin increased by 1.7 percentage points to 26.5%.
In the long run, the company will gradually realize the closed-loop building of the whole heparin industry chain, and rely on this, open up markets at home and abroad, continue to increase its market share, further highlight its core competitive advantages, and profitability is expected to continue to improve steadily. At the same time, with the increase in the proportion of preparation business, the adjustment of income structure will also reduce the impact of API fluctuations on its performance.
Point 2: become a supplier of enoxaparin sodium preparation in the United States, the first domestic pharmaceutical company to evaluate the consistency of enoxaparin sodium injection.
The company continues to promote the global layout of preparations, and in September, the company issued a notice announcing that FDA has approved Tiandao Pharmaceutical, a wholly owned company, to be registered as a drug and API supplier of enoxaparin sodium preparation licensees in the United States.
In October, Tiandao Pharmaceutical received the notice of approval of Drug Supplementary Application issued by the State Drug Administration, and all five specifications of enoxaparin sodium injection sold in China passed the consistency evaluation. it has become the first pharmaceutical company in China to apply and pass the consistency evaluation.
Enoxaparin is the "gold standard" anticoagulant and antithrombotic drug, with global sales of more than US $2.7 billion in 2019. The company has been approved in 35 countries and sold in 21 countries. This FDA approval will help the company to open the US market and accelerate its international layout. At the same time, through consistency evaluation, we can enhance the market competitiveness of the company, and then increase the domestic market share, and promote the sustained and rapid growth of preparation business.
The main points are the rapid development of 3:CDMO business and the improvement of marginal effect. It is expected that the company will promote CDMO business through the two major platforms of Saiwan Biology and SPL. In the first three quarters, the company achieved 579 million yuan in revenue, 26.5% gross profit margin, rapid development of CDMO business, continuous optimization of operation capacity and customer structure, and significant improvement in gross margin marginal effect.
The company focuses on cardiovascular and oncology areas, and has a number of world's first R & D pipelines, including Oregovomab for advanced primary ovarian cancer, AR-301 for Staphylococcus aureus pneumonia, and RVX-208 for reducing the incidence of severe cardiovascular events in patients with II diabetes, all of which are in the evaluation stage of global III clinical studies, and innovative transformation is expected in the future.
Investment advice:
Affected by the purchase rhythm adjustment and exchange rate fluctuation of raw drug customers in the third quarter, the company's performance fluctuated significantly compared with the previous quarter, but in the long run, the company's competitive advantage in the whole industry chain of heparin gradually appeared, and it was approved by FDA to become the supplier of enoxaparin sodium preparation in the United States, and the first domestic application and passed the consistency evaluation of enoxaparin sodium injection, which will lead to the rapid expansion of its preparation business. To improve the profit structure and profitability, we expect the company's operating income to be 5.914 billion yuan, 6.789 billion yuan and 7.718 billion yuan respectively from 2020 to 2022, with year-on-year growth rates of 27.9%, 14.8% and 13.7%, respectively, and net profits of 1.072 billion yuan, 1.322 billion yuan and 1.589 billion yuan, respectively. the year-on-year growth rates were 1.2%, 23.3% and 20.2%, respectively. The forecast EPS is 0.73, 0.90 and 1.08 yuan respectively, corresponding to the closing price on November 3, and the PE is 27X, 22X and 18X respectively, maintaining the "highly recommended" rating.
Risk tips: new drug research and development is not as expected, crude heparin prices fluctuate, overseas market expansion is not as expected, and preparation sales are not as expected.