Description of the event
The company released its 2023 mid-year report. 2023H1 achieved operating income of 83.751 million yuan, a year-on-year decrease of 37.92%; realized net profit of 44.7979 million yuan, a year-on-year decrease of 323.70%; realized net profit of non-return net profit of -494.730 million yuan, a year-on-year decrease of 385.98%; basic earnings per share was -0.07 yuan, a year-on-year decrease of 255.56%.
Incident reviews
The performance of 2023H1 companies declined markedly compared to the same period last year, but there was a significant improvement in Q2 compared to Q1, and an inflection point in the recovery of the industry is approaching. The company's revenue and net profit declined significantly in the first half of 2023 compared to the same period last year. The main reasons were: ① The recovery of internal and external economic markets fell short of expectations, and downstream customer financing was poor, which affected the company's market business development and project delivery to varying degrees. In the short term, operating income and repayment speed declined; ② The company continued to increase investment in R&D and continuously reserve personnel for the Lingang Industrial Base to be put into operation as scheduled. Operating costs increased dramatically in the short term, and operating gross profit and net profit declined. At present, there are obvious signs of recovery in industry investment and financing, and the company's Q2 performance has also improved markedly compared to Q1: ① 2023H1 global biomedical investment and financing showed a recovery trend. The Q2 investment and financing event increased by 61% and the amount increased by 115% compared to Q1, and many domestic gene and cell therapy companies completed financing one after another; ② 2023Q2 achieved revenue of 52.996 million yuan, an increase of 71.99% over the previous month; Q2 achieved net profit of -1,3546 million yuan, significantly compared to 31.4733 million yuan in Q1 Narrowed.
2023H1's CRO business grew steadily, but the CDMO business declined significantly. ① In the CRO business, the company continues to launch new products, try to expand new fields, expand service scenarios, and further increase its market share. 2023H1 achieved sales revenue of 3.3872 million yuan, an increase of 35.69% over the same period last year.
② In the CDMO business, due to factors such as the continued external economic downturn, market recovery falling short of expectations, and rising financing pressure from downstream customers, etc., the company's CDMO project orders have been delayed to varying degrees and performance has declined. 2023H1 achieved sales revenue of 44.3073 million yuan, down 58.55% from the same period last year.
The first phase of Lingang is expected to be put into operation in the second half of the year, and production capacity can be expected to be released. On April 21, 2023, the “Heyuan Intelligent Manufacturing Precision Medicine Industry Base” opened in the Lingang New Area of Shanghai, with a total investment of about RMB 1.5 billion, a total construction area of about 77,000 square meters, and a maximum reactor size of 2,000 L. It continues to provide a one-stop CRO/CDMO solution from DNA to NDA for the global gene and cell therapy industry. As of 2023H1, the construction of the large-scale base in Lingang has accumulated more than 800 million yuan, and all construction and equipment commissioning work is progressing in an orderly manner. It is expected that the first phase of the project will be officially put into operation in the second half of 2023, making full preparations for further release of production capacity.
Investment advice
The company is expected to achieve revenue of 3.85, 5.24, and 700 million yuan (original value of 403, 5.25 million yuan, 651 million yuan) in 2023-2025, respectively, up 32.2%, 35.9%, and 33.7% year on year; net profit of 0.46, 0.51, and 62 million yuan respectively (original value was 0.46, 0.50, and 61 million yuan), with year-on-year increases of 17.3%, 10.9%, and 22.2%; corresponding EPS was 0.07, 0.08, 0.10 yuan respectively (original value was 0.09, 0.10 million yuan) 0.10, 0.12 yuan). Calculated at the closing price of 9.62 yuan on August 28, the corresponding PE is 136.0X, 122.7X, and 100.4X, respectively. Considering that the company's new production capacity in Lingang will soon be released, and that it continues to increase R&D investment and broaden the direction of forward-looking R&D applications, it has achieved varying degrees of progress in basic gene therapy research and production process development. In addition to the fact that the industry is currently showing initial signs of recovery, the company's performance is expected to gradually recover, so it maintains its “holdings increase-A” rating.
Risk warning
There are uncertainties in the development of the gene therapy industry; there is a risk that clients' new drug development and commercialization will fall short of expectations; there is a risk that the growth trend of the gene therapy CDMO business will slow down; there is an uncertain risk of future expansion of the CDMO business; and the risk of insufficient production capacity in the short term.