1H2023 performance is in line with our expectations
The company announced 1H2023 results: revenue 84 million yuan, year-on-year-37.92%; homing net loss 45 million yuan, year-on-year-323.70%. In line with our expectations, the decline in growth is mainly due to the weakening and recovery of downstream demand due to the macro environment, project delivery and rebate are affected, and operating costs are increased as a result of the commissioning of the port base.
Trend of development
CDMO short-term affected by weak downstream demand, 2023Q2 profitability improved month-on-month. In terms of 1H2023 segment, CRO income is 33.08 million yuan, compared with the same period last year, + 35.69% CDMO income is 44.3 million yuan,-58.55% compared with the same period last year. The decline in CDMO revenue is mainly due to the slower-than-expected recovery of market demand under the pressure of the macro environment, and the delay of CDMO projects. 1H2023, the company supports CDMO customers to obtain 7 IND clinical approvals, with a new order of more than 130 million yuan. We expect that with the gradual release of production capacity of the port base and the improvement of the macro environment, the order will recover. 2023Q2, company income is 53 million yuan, month-on-month ratio + 71.0%, of which CDMO income is 29 million yuan, month-on-month ratio + 85.8% month-on-month CDMO income is 19 million yuan, month-on-month ratio is + 41.3%, net loss is 13 million yuan (32 million yuan of VS.2023Q1), net profit of non-return mother is 16 million yuan (33 million yuan of VS.2023Q1), month-on-month loss narrowed, showing a recovery trend.
We will continue to increase investment in research and development and release the production capacity of the port base. The R & D cost of 1H2023 is 24.33 million yuan, + 71.71% compared with the same period last year, and the R & D cost rate is 29.06%, which is + 18.55ppt compared with the same period last year. It is mainly distributed in frontier non-viral vectors such as mRNA and exosomes, R & D optimization of viral vectors, development of cutting-edge cell culture technology, development of detection technology, and so on. On August 7, 2023, the near 77000m2GMP production base in Lingang New area was officially opened, with a total investment of about 1.5 billion yuan, and the maximum size of the reactor can reach 2000L. By the end of June 2023, the investment has exceeded 800 million yuan, and the construction and equipment commissioning work is in progress in an orderly manner. The company expects that the first phase of the project will be officially put into production in the second half of 2023.
The technical strength has been further strengthened. In terms of lentiviruses, the cSLenti lentivirus packaging system (used to overcome the production of non-virus lentivirus vectors) further expands the scope of application, increasing the virus yield for a variety of lentivirus vectors, combined with other optimized lentivirus production for CAR-T, the output can be increased by 40% / 100%. The newly developed pASLenti lentivirus packaging system for LncRNA expression has been successfully tested and has been authorized by the national invention patent. 2) in the aspect of adeno-associated virus, the traditional AAV Shuffling library based on the capsid sequences of 38 wild-type AAV was constructed, and the scheme of AAV fixed-point Shuffling library was designed creatively.
Profit forecast and valuation
Keep profit forecasts for 2023 and 2024 unchanged. Maintain the outperform industry rating, but due to the recent systematic adjustment of the pharmaceutical sector, we have lowered our target price by 7.4% to 12.50 yuan (based on the DCF valuation method), which is 30.2% higher than the current stock price.
Risk
Downstream demand fluctuations, regulatory policy changes, market competition intensified, customer commercialization is not as expected.