On August 23, Heyuan Biology released its 2023 mid-term report: 2023H1 achieved an operating income of 83.751 million yuan, a decrease of 37.9% compared with the same period last year. The return net profit was-44.7979 million yuan, down 323.7% from the same period last year, mainly due to: 1) the internal and external economic market rebounded less than expected in the first half of the year, and the financing of downstream customers was not smooth. As a result, the company's market business expansion, project delivery and other aspects were affected to varying degrees, and the operating income and the speed of payback decreased in the short term. 2) the company increases its R & D investment and continuously reserves personnel for the port base, which leads to a substantial increase in operating costs and a decline in operating margin and net profit in the short term. Among them, Q2's single-quarter income was 52.9596 million yuan, down 14.3% from the same period last year, and the net profit returned to its mother was-13.0546 million yuan, down-264.1% from the same period last year.
CRO business is growing rapidly, while CDMO business is fluctuating. 1) CRO business 2023H1 achieved sales revenue of 33.0872 million yuan, an increase of 35.7% over the same period last year, mainly due to the company's continuous launch of new products, attempts to expand new areas, expand service scenarios, and further increase market share 2) the revenue of CDMO business 2023H1 reached 44.3073 million yuan, down 58.6% from the same period last year, mainly due to the external sustained economic downturn and the market recovery speed was lower than expected, the financing pressure of downstream innovative drug R & D enterprises increased overall, and the promotion of pharmaceutical companies'R & D pipelines showed a cautious trend, resulting in varying degrees of delay in the company's CDMO project orders and a decline in performance in the short term. However, the company has responded actively, giving full play to the advantages of comprehensive business, diversified technology and rich project experience to open up new customers at home and abroad in oncolytic virus, AAV gene therapy, CAR-T/NK, stem cell therapy and mRNA and other subdivided fields, and has made good order progress; in the first half of the year, the company supported CDMO customers to obtain 7 new IND approvals, with new orders exceeding 130 million yuan.
Research and development investment continues to increase, and the port base is expected to be put into production in the second half of the year. The company's 2023H1 R & D expenditure was 24.3388 million yuan, an increase of 71.7% over the same period last year; R & D investment accounted for 29.06% of revenue, an increase of 18.55pct. The company continues to increase R & D investment, and implements a comprehensive layout in the R & D optimization of cutting-edge non-viral vectors such as mRNA and exosomes, the development of cutting-edge cell culture technology and detection technology, and further enriches the R & D team. With the orderly progress of the construction and equipment commissioning of the port base, it is expected that the first phase of the project will be officially put into production in the second half of 2023, making full preparations for further capacity release to better meet the rapidly growing demand for gene therapy CDMO.
Profit forecast and investment rating: considering the uncertainty of global investment and financing and the reserve of talents for the port base, we downgrade our previous profit forecast and expect the company's revenue from 2023 to 2025 to be 371 million yuan, 501 million yuan and 713 million yuan, respectively, an increase of 27%, 35% and 42% over the same period last year. Net profits were 51 million yuan, 59 million yuan and 80 million yuan respectively, up 30%, 15% and 37% over the same period last year, corresponding to PE valuations of 121,105 and 76 times. The company is a leading CGT CXO company in China, and its technology platform, project experience and GMP production capacity are at the leading level in China, maintaining a "buy" rating.
Risk hints: the risk of uncertain investment and financing in the primary market; the risk of regulatory policy change; the risk of intensified market competition; the risk that customers' new drug research and development and commercialization are less than expected; the risk of shortage and loss of technical personnel