Incident Overview

(1) The company released its 2022 annual report: it achieved annual revenue of 1,659 million yuan, an increase of 42.12% over the previous year, achieved net profit of 338 million yuan, an increase of 19.85% over the previous year, and achieved deduction of 307 million yuan in non-net profit, an increase of 13.29% over the previous year.

(2) The company released its report for the first quarter of 2023: it achieved operating income of 451 million yuan, an increase of 26.80% over the previous year, achieved net profit of 102 million yuan, an increase of 31.58% over the previous year, and achieved net profit of 99 million yuan after deducting non-net profit of 99 million yuan, an increase of 32.06% over the previous year.

Analytical judgment:

Performance growth is in line with expectations, and international expansion is expected to continue to contribute to the company's performance flexibility

The company achieved operating revenue of 419 million yuan and 451 million yuan respectively in 22Q4 and 231, up 9.89% and 26.80%, respectively. We judge that the relative slowdown in performance growth was mainly affected by domestic COVID-19 prevention and control policies and changes in the domestic investment and financing environment. Considering that the company signed new orders of 3.458 billion yuan (yoy +41.01%) in '22 and continued upward growth on the employee side, and considering that overseas business expansion contributed to performance elasticity, it is expected that the company's performance will continue to grow rapidly in '23.

New orders continued to grow rapidly in '22, laying the foundation for future performance growth: the company added 380 new customers in '22, the cumulative number of customers exceeded 1,840, and the customer service range continued to expand. The amount of new orders signed by the company in '22 was 3.458 billion yuan, an increase of 41.01% over the previous year. Continuing the rapid growth trend, laying the foundation for future performance growth.

The preclinical research business maintained rapid growth and contributed to the company's performance flexibility: By business, the preclinical research business achieved revenue of 924 million yuan in '22, an increase of 66.86% over the previous year. The number of new orders signed was 2,167 billion yuan, an increase of 53.83% over the previous year, all of which continued to show rapid growth and contribute performance flexibility to the company. Furthermore, the drug discovery and pharmaceutical research business achieved revenue of 735 million yuan in '22, an increase of 19.95% over the previous year. The number of new orders signed was 1,291 billion yuan, an increase of 23.71% over the previous year. We judge that changes in the epidemic prevention and control policy in '22 disrupted performance and orders.

Overseas business is gradually expanding, and is expected to contribute to performance elasticity in the future: the company's overseas business achieved revenue of 398 million yuan in '22, an increase of 53.90% over the previous year, the corresponding gross margin was 42.06%, an increase of 0.13 pct over the previous year. Among them, the drug discovery and pharmaceutical research business achieved revenue of 181 million yuan, an increase of 50.18% over the previous year, and the preclinical research business achieved revenue of 78 million yuan, an increase of 62.55% over the previous year, all of which continued to show rapid growth. This is also the result of the gradual expansion of international business since 2020. Looking forward to the future, we Judging that overseas business is expected to continue to contribute flexibility to the company's performance.

Performance forecasts and investment recommendations

As a target for pre-clinical integration, which is scarce in China, the company looks forward to the next 5 to 10 years. It will continue to deepen its drug discovery +CMC+ preclinical research business, continue to benefit from the high level of prosperity in the domestic market and the continuous expansion of overseas markets and the continuous implementation of CMC business. It is expected to become one of the leading preclinical CRO with a global outlook based in China. Taking into account changes in the domestic investment and financing environment, adjusted the earnings forecast for the previous period, that is, 2023-2025 revenue was adjusted from 24.95/34.80/NA billion yuan to 22.49/29.67/3859 yuan, and EPS was adjusted from 6.49/9.33/NA yuan to 596/8.06/10.60 yuan, corresponding to the closing price of 149.02 yuan/share on April 25, 2023, PE was 25.01/18.48/14.05 times, respectively, maintaining the “buy” rating.

Risk warning

The company's order demand fell short of expectations, the commissioning of fund-raising projects fell short of expectations, the risk of loss of core technical backbone and management, the risk of increased competition, and the impact of the novel coronavirus pandemic.