Main points of investment:
The company was founded in 2002 and listed on Shenzhen gem in 2015, specializing in CRO services, clinical research services is the company's main source of income and profit. In addition, the company's business also covers preclinical independent research and development business, preclinical service business, technology achievement transformation service and CDMO business, as well as technical consulting services such as research scheme design, data management, data statistical analysis, Sino-US double newspaper business and so on. In 2018, the company obtained GLP laboratory certification and has the ability of preclinical evaluation of traditional Chinese medicine, chemical medicine and biological medicine.
In the first half of 2023, the company achieved an operating income of 232 million yuan, an increase of 32.73% over the same period last year; a net profit of 17.6191 million yuan belonging to shareholders of listed companies, an increase of 18.16% over the same period last year; and a net profit of 9.717 million yuan after deduction belonging to shareholders of listed companies, a substantial increase of 153.93% over the same period last year. Basic earnings per share is 0.05 yuan.
According to the business segment, the company's main revenue and profits mainly come from the clinical research service business, and the improvement of the performance in the first half of the year also comes from the improvement of the clinical research service business. During the reporting period, the company realized clinical research service revenue of 173 million yuan, an increase of 51.37% over the same period last year, and a new clinical research service contract value of 447 million yuan, an increase of 68.26% over the same period last year. After the epidemic, the company improved the capacity of clinical research services through the introduction of talents, and the amount of orders for clinical research services and the number of projects increased significantly; the business income of preclinical research business reached 28.5911 million yuan, a decrease of 5.24% over the same period last year, which was mainly related to the progress of project recognition income; from the amount of new preclinical research service contracts in the first half of the year, the amount was 84 million yuan, an increase of 18.76% over the same period last year. In the second half of the year, the income of preclinical research services will be improved compared with the same period last year. The income of preclinical independent R & D and technology achievement transformation service is confirmed to be fluctuating; during the reporting period, preclinical independent R & D and technology achievement transformation service did not generate income, and this sector may contribute income in the second half of the year. CDMO business is still climbing.
In terms of profitability, the company's gross profit margin in the first half of the year was 36.40%, down 3.35 percentage points from the same period last year, mainly due to the decline in gross profit margin caused by the increase in the number of other business personnel, such as preclinical research services and other consulting services. During the reporting period, the gross profit margin of clinical research services increased by 0.63 percentage points compared with the same period last year.
In terms of the period expense rate, the company's sales expense rate in the first half of 2023 was 7.79%, down 0.6% from the same period last year; the management expense rate was 13.52%, down 2.31% from the same period last year; the financial expense rate was-0.24%, compared with-0.22% in the same period last year; and the R & D expense rate was 10.09%, down 0.6% from the same period last year. With the acceleration of order conversion in the second half of the year, the expense rate is expected to decline further during the period.
There were plenty of orders on hand in the first half of the year, and orders for traditional Chinese medicine grew faster than expected. As of mid-2023, the amount of new business contracts of the company was about 559 million yuan, an increase of about 49 percent over the same period last year, and continued to maintain rapid growth. Among them, the amount of new contracts for traditional Chinese medicine R & D services was about 194 million yuan, an increase of about 400 percent over the same period last year. By the end of the reporting period, the amount of unrecognized revenue from the contract executed by the company is about 1.866 billion yuan, and the time for the order to be converted into revenue depends on the progress of the project, considering that the fourth quarter is the traditional peak season for order confirmation. the speed of order conversion may be accelerated in the second half of the year.
The company is expected to earn 0.14 yuan per share in 2023, 0.19 yuan per share in 2024 and 0.26 yuan per share in 2025, corresponding to the closing price of 8.85 yuan on September 5, with a dynamic price-to-earnings ratio of 63.50 times, 47.59 times and 33.92 times, respectively. Maintain the company's "overweight" investment rating.
Risk tips: medical policy risks, order confirmation is not as expected, uncertainty in the transformation of technological achievements