Event: on October 25, 2023, Heyuan released its results for the third quarter of 2023. In the first three quarters, the company achieved revenue of 137 million yuan, down 36.38% from the same period last year, realized net profit of-71 million yuan, down 309.65% from the same period last year, and deducted non-return net profit of-79 million yuan, down 373.71% from the same period last year. In a single quarter, Q3 achieved revenue of 53 million yuan, down 33.8% from the same period last year; net profit from home was-26 million yuan, down 289.38% from the same period last year; and net profit from non-return was-29 million yuan, down 355.09% from the same period last year.
Gene therapy CRO is growing steadily, while gene therapy CDMO is still under pressure for a short time. In the first three quarters, the income of gene therapy CRO business was 53.0013 million yuan, an increase of 22.56% over the same period last year; the income of gene therapy CDMO section was 73.3917 million yuan, down 55.81% from the same period last year. At present, the external economic market environment continues to be weak, and the financing of downstream customers of gene therapy CDMO is lower than expected, which has a certain impact on the company's market development and project delivery, and short-term performance is under pressure.
The precision medical base in Hong Kong has been gradually put into production, and the newly signed order is expected to continue to improve. The first phase of the company's Lingang GMP production base was partially put into production in September 2023, with four bright capabilities of super-large scale, ultra-complete process system, ultra-new process system and intelligent equipment, with a maximum reactor size of 2000L, with more than 30 gene cell therapy production lines and nearly 20 cell therapy product lines with different characteristics, to meet the needs of global customers from DNA to IND to NDA. New orders for CDMO exceeded 130 million yuan in the first half of 2023. With the release of production capacity of the port base, new orders signed by Q3 have increased, and new orders are expected to continue to improve in the future.
Improve the ability of R & D and innovation in all aspects, and the achievements of innovation can enable the development of the industry. The company pays attention to the improvement of R & D capability. In the first three quarters, R & D investment reached 38.5809 million yuan, an increase of 62.47% over the same period last year, accounting for 28.16% of operating income, an increase of 17.13pp. the size of the team increased rapidly, with a total staff of 741 by the end of September 2023, an increase of 110 over the end of last year, including 437 for CDMO and 153 for CRO. By September 2023, the company has obtained 23 invention patents and 4 internationally registered trademarks, including 1 new utility model patent and 2 internationally registered trademarks in Q3. A number of important innovations of the company have attracted the attention of the industry, with leading technology in the development of new AVV vectors and new lentivirus vectors. AAV vector plasmids have also successfully obtained the DMF record of FDA in the United States to meet the needs of global customers for AVV vectors.
Investment suggestion: as a domestic high-quality gene therapy CRO/CDMO enterprise, the company continues to speed up the construction of new production capacity and the overseas business continues to advance. We estimate that the company's homing net profit from 2023 to 2025 will be 0.10, 0.25, respectively, 0.49 million yuan, respectively, and PE will be 537, and 214, respectively, 108 times, maintaining the "cautious recommendation" rating.
Risk hints: downstream gene therapy customer demand change risk, domestic market competition intensified risk, new drug research and development less than expected risk, technology upgrade iteration risk, regulatory policy change risk.