Incident Overview

The company released its 2023 annual report: In the first half of the year, it achieved operating income of 872 million yuan, an increase of 17.43% over the previous year, achieved net profit of 166 million yuan, an increase of 2.17% over the previous year, deducted 156 million yuan in non-net profit, an increase of 1.39% over the previous year.

Analytical judgment:

Performance is affected by weakening domestic and foreign trends, and overseas business is expected to continue to contribute to performance elasticity

The company achieved operating income of 872 million yuan in the first half of '23, an increase of 17.43% over the previous year, and net profit of 166 million yuan, an increase of 2.17% over the previous year. Of these, 23Q2 achieved operating income of 421 million yuan, a year-on-year increase of 8.80%, and net profit of 65 million yuan, a year-on-year decrease of 24.41%. We believe that the slowdown in revenue side growth was mainly affected by the downward trend in domestic and foreign investment and financing, and the profit side was also affected by the increase in depreciation and amortization brought about by new production capacity and a decline in gross margin. The company signed 1,557 million yuan of new orders in the first half of '23, a year-on-year decrease of 6.65%. Our judgment was mainly affected by the weakening trend in domestic investment and financing. Since 2020, the company has gradually expanded its international customers. That is, the overseas business achieved revenue of 226 million yuan in the first half of '23, an increase of 32.42% over the previous year. Continuing the rapid growth trend, looking forward to the future, we judge that overseas business is expected to continue to contribute flexibility to the company's performance.

Performance forecasts and investment recommendations

As a scarce preclinical integration target in China, the company will continue to be deeply involved in drug discovery+CMC+ preclinical research business for the next 5 to 10 years. It will continue to benefit from the high prosperity of the domestic market and the continuous expansion of overseas markets and the continuous implementation of CMC business, and is expected to become one of the leading pre-clinical CRO companies based in China and looking forward to the world. Taking into account the changes in the domestic investment and financing environment, the previous profit forecast was adjusted, that is, revenue for 2023-2025 was adjusted from 22.49/29.67/3.859 billion yuan to 19.57/23.19/2,753 billion yuan, and EPS was adjusted from 596/8.06/10.60 yuan to 2.85/3.53/4.20 yuan, corresponding to the closing price of 76.79 yuan/share on August 25, 2023. PE was 27/22/18 times, maintaining the “buy” rating.

Risk warning

The company's order demand falls short of expectations, the launch of fund-raising projects falls short of expectations, the risk of loss of core technical backbone and management, and the risk of increased competition.