Incident: The company released its 2022 annual report. During the reporting period, the company achieved revenue of 1,457 million yuan, an increase of 15.80% over the previous year; the net profit of the mother and net profit after deducting non-net profit were 339 million and 232 million yuan respectively, up 137.67 percent and 84.26% year-on-year.
The rapid development of the CDMO+ formulation business led to a high increase in the company's performance: the company's high performance in 2022 was mainly due to the company's continuous promotion of high-margin CDMO and pharmaceutical businesses (gross margins were 51.97% and 50.78% respectively). Among them, the CDMO business achieved revenue of 504 million yuan, an increase of 89.99% over the previous year; the pharmaceutical business achieved revenue of 223 million yuan, an increase of 50.78% over the previous year, driving the company's gross margin to increase 2.95pct year on year to 40.30%. The company's sales, management, finance, and R&D expenses rates were 3.47% (+1.14pct), 13.91% (+0.57pct), 0.47%, (-1.30pct), and 6.74% (-0.28pct), respectively.
The strategic transformation is progressing smoothly, and the production capacity layout has laid the foundation: the company is actively promoting the strategy of integrating CDMO and API formulations, which is progressing smoothly. In terms of CDMO's business, after the signing of the strategic agreement with MSD, the brand influence increased and played a positive role in business expansion. At the same time, the first nine projects with MSD progressed smoothly, which is expected to bring revenue elasticity. Negotiations have also begun on the second phase of the project. In terms of the formulation business, the company actively implemented the development strategy of “technology transfer+independent declaration+domestic MAH cooperation”, seizing the rapid commercial release opportunities brought by collection, and successfully achieved the renewal of the procurement license. At the same time, the company actively promoted R&D registration. It is expected that 13-15 formulation projects will pass CDE approval in 23, and have laid out “blockbuster drugs” for which patents have expired, such as sigliptin metformin tablets. In terms of the API business, the company continuously optimizes its customer and product structure and lays out the original variety of APIs that have expired, which is expected to contribute incrementally. In terms of production capacity, the company has put new production capacity into operation one after another, and has begun the construction layout of Xuancheng Minova Phase II, laying the foundation for future growth.
Investment advice: We expect the company to achieve operating income of 18.68/23.85/2946 billion yuan in 2023-2025, an increase of 28.24%/27.67%/23.48% over the previous year; the net profit of the mother was 307/397/503 million yuan, a year-on-year change of -9.52%/29.47%/26.68%. The corresponding PE was 16.69/12.89/10.17 times, respectively, maintaining the “increase in holdings” rating.
Risk warning: R&D progress falls short of expectations; capacity construction progress falls short of expectations; risk of exchange rate fluctuations