Dongfulong is a leading comprehensive service provider of pharmaceutical equipment in China. In the short term, the company's profitability is under pressure due to the periodic downturn in the domestic and foreign biomedical investment and financing environment, but in the medium to long term, the company adheres to the strategic planning of "one body and two wings". On the one hand, the company continues to expand overseas markets and improve customer coverage, and is committed to growing into the mainstream supplier of global integrated pharmaceutical equipment. On the other hand, the company actively carries on the forward-looking layout around the macromolecule and CGT (cell and gene therapy, cell gene therapy) industry chain, which is expected to break the CAPEX (capital expenditure, capital expenditure) cycle; the superposition company is certain to increase production and expand, and we believe that the company's future performance will continue to grow steadily. To sum up, we give the company 2023 PE 20x, corresponding to the target price of 25 yuan, to maintain the "buy" rating.
The company's income is growing steadily, and many factors disturb the company's profit level. The company's 2023H1 realized operating income of 2.951 billion yuan, an increase of 21.58% over the same period last year, a net profit of 426 million yuan, an increase of 5.82% over the same period last year, and a net profit of 393 million yuan, an increase of 5.72% over the same period last year. In a single quarter, the company's 2023Q2 achieved operating income of 1.528 billion yuan, an increase of 28.43% over the same period last year, a net profit of 195 million yuan, an increase of 2.01% over the same period last year, and a net profit of 168 million yuan, a decrease of 2.89% over the same period last year. In addition, the company's credit impairment in the first half of the year was 77 million yuan (41 million yuan in the same period last year) and asset impairment was 36 million yuan (26 million yuan in the same period last year).
In terms of profitability, the company's 2023H1 gross profit margin was 38.94%, down 3.23pcts from the same period last year; the net profit rate was 15.58%, down 2.00pcts-the company's 2023H1 sales expense rate / management expense rate / R & D expense rate / financial expense rate was 4.99% 2023H1 8.63% picks 5.56% Rue 1.63%, respectively year-on-year change + 0.48/-0.19/-0.68/-2.11pcts (cumulative change-2.50pcts). During the reporting period, the change in the pharmaceutical industry accelerated, promoting the transformation and upgrading of the domestic pharmaceutical equipment industry, the industry concentration increased, the competition became increasingly fierce, the gross profit margin of the company's high-income sector was under pressure (the gross profit margin of the preparation division decreased by 4.12pcts, the gross profit margin of the biotechnology division decreased by 4.66pcts), and the superimposed sales expenses increased (sales expenses increased by + 34.43% compared with the same period last year). As a result, the growth rate of the company's profit end is lower than that of the revenue side. Among them, the sales expenses are mainly caused by the increase in salary brought about by the expansion of the scale of sales staff in this period, as well as the increase in publicity and promotion expenses, travel expenses and exhibition expenses.
Adhering to the mission of "professional technology serving biomedicine", injection business drives the overall performance growth of the company.
The company revolves around the development strategy of "systematization, internationalization and digital intelligence", through professional, high-quality and efficient service, to provide global customers with forward-looking and competitive biotechnology, preparations, overall engineering solutions, food engineering and other system solutions. From a business point of view, 1) preparation Division: 2023H1 revenue 1.581 billion yuan, year-on-year increase of 26.63%, gross profit margin 41.68%, year-on-year decline of 4.12 5.79pcts-of which ① 2023H1 injection machine and system income is 1.309 billion yuan, accounting for 44.36% of the company's revenue, driving the overall performance growth of the company, injection machine and system revenue increased by 22.23% year-on-year, gross profit margin of 40.43%, a year-on-year decline of 5.79pcts The income of ② inspection packaging single machine and system was 183 million yuan, an increase of 67.28% over the same period last year, and the gross profit margin was 53.06%, up 5.05 pcts over the same period last year; the income of ③ oral solid single machine and system was 89 million yuan, up 30.48% from the same period last year, and 36.50% from the same period last year. 1.01 pcts (2) Biotechnology Division:
The revenue of 2023H1 was 800 million yuan, up 7.18% from the same period last year, and the gross profit margin was 40.26%, down 4.66% from the same period last year-of which ① 2023H1 bioengineering unit and system income was 500 million yuan, up 2.58% from the same period last year, and gross profit margin was 37.28%, down 2.62% from the same period last year; the income of ② Life Science products Department was 108 million yuan, down 33.00% from the same period last year, and the gross profit margin was 57.14%, which was down 13.20pcts from the same period last year. ③ API stand-alone and system income 192 million yuan, year-on-year increase of 97.04%, gross profit margin 38.49%, year-on-year increase of 10.66pctss3) Engineering Division: 2023H1 revenue of 265 million yuan, year-on-year increase of 11.77%, gross profit margin of 20.85%, year-on-year increase of 2.89%-of which ① 2023H1 pharmaceutical intelligent information engineering income 34 million yuan, year-on-year increase of 125.91%, gross profit margin 36.36%, year-on-year increase of 26.65pcts The income of ② purification engineering and water technology was 232 million yuan, an increase of 4.11% over the same period last year, and the gross profit margin was 18.59%, up 0.08 pctten over the same period last year. 4) Food Business Department:
2023H1 revenue 149 million yuan, year-on-year increase of 59.49%, gross profit margin 25.06%, year-on-year increase of 3.20pcts 5.38pcts 5) after-sales service and accessories: 2023H1 revenue 150 million yuan, up 49.90% year-on-year, gross profit rate 48.55%, down 5.38pcts from the same period last year. During the reporting period, the company accelerated the construction of information platform, created a digital manufacturing and service platform, improved the level of fine management, and enhanced the resilience of sustainable development.
The growth rate of domestic income is obvious, and the company is actively expanding its market share at home and abroad. From a regional perspective, 2023H1's domestic income was 2.369 billion yuan, up 31.46% from the same period last year, with a gross profit margin of 36.11%, down 3.31pcts from the same period last year; international income was 581 million yuan, down 6.93% from the same period last year, and gross profit margin was 50.51%, an increase of 0.39pct over the same period last year; during the reporting period, the company strengthened marketing and marketing efforts at home and abroad, actively participated in influential professional exhibitions and technical forums in the industry, and stabilized and expanded its market share. At the same time, in order to better expand the overseas market and provide services for overseas customers, the company cooperates with promoters to carry out business abroad, and promoters actively introduce the company's products to overseas customers and tap business opportunities. and urge the company to sign order contracts with customers directly. In addition, the company has established joint ventures and technical cooperation with partners in the United States, Europe, Japan and other places to provide solid support for enhancing the influence of global brands and competing for global market share. Continue to expand the number of overseas customers and coverage areas.
Risk factors: the risk that the growth progress of the downstream biopharmaceutical industry is not as expected; the risk that the company's fixed expansion capacity cannot be fully absorbed; the risk of policy changes in the pharmaceutical industry that exceed expectations; the risk that the company's overseas expansion is less than expected; the risk of technological research and development failure of the company; the management risk of the company's business expansion.
Profit forecast, valuation and rating: the company is the leading integrated service provider of pharmaceutical equipment in China, and the 2023H1 performance continues to grow steadily, but due to the rising sales costs of the company with fierce competition in the industry, the overall gross profit level of the overlay company is under pressure, so we downgrade the company's 2023 EPS forecast for 24 years to 1.27max 1.55 yuan (the original forecast is 1.41 PE 1.82 yuan), and the current price corresponds to 15x/12x respectively. The new EPS in 2025 is predicted to be 1.86 yuan, and the current price corresponds to 10x PE. We refer to the average PE of comparable companies (Tailin Biology, Xinhua Medical, Chutian Technology) in 2023. In the short term, the company's profitability is under pressure due to the periodic downturn in the domestic and foreign biomedical investment and financing environment, but in the medium and long term, the company adheres to the strategic plan of "one body and two wings". On the one hand, the company continues to expand overseas markets and improve customer coverage. Committed to growing into a mainstream global supplier of integrated pharmaceutical equipment On the other hand, the company actively carries on the forward-looking layout around the macromolecule and CGT (cell and gene therapy, cell gene therapy) industry chain, which is expected to break the CAPEX (capital expenditure, capital expenditure) cycle; the superposition company is certain to increase production and expand, and we believe that the company's future performance will continue to grow steadily, so we give the company 20 times PE in 2023, corresponding to a target price of 25 yuan, maintaining a "buy" rating.