Description of the event

On October 30, 2023, Baplesys released its 2023 three-quarter report: the company achieved operating income of 144 million yuan (+16.31% year-on-year) and net profit of 337 million yuan (-35.79%) in the first three quarters of 2023; achieved net profit of 413 million yuan (+17.02% year-on-year) in the first three quarters of 2023, and realized net profit of 128 million yuan (-22.68% year-on-year).

Incident comments

Regular business grew steadily, and profits were under pressure for a short time. In the third quarter of 2023, the company achieved revenue of 144 million yuan (+16.31% year-on-year) and net profit of 37 million yuan (-35.79% year-on-year); the first three quarters of 2023 achieved 413 million yuan (+17.02% year-on-year). After deducting specific acute respiratory infectious disease-related products, the regular business achieved sales revenue of 373 million yuan, an increase of 30% over the previous year, of which overseas conventional business increased by more than 40% year on year.

Profit side: The company achieved net profit of 37 million yuan (-35.79% year-on-year) in the third quarter of 2023 and net profit of 128 million yuan (-22.68% year-on-year) in the first three quarters. The decrease in profit was mainly due to the increase in current employee remuneration and depreciation and amortization.

Cost side: The company's sales expenses for the third quarter of 2023 were 43 million yuan (+38.35% year-on-year), management expenses were 23 million yuan (+6.61% year-on-year), and R&D expenses were 33 million yuan (-10.61% year-on-year). The increase in sales expenses was mainly due to the continuous expansion of the company's operating scale, sales staff and business space.

The equity incentive plan was implemented, and the repurchase demonstrated confidence in development. On September 15, 2023, the company's board of directors passed a bill relating to the 2023 restricted stock incentive plan. The number of restricted shares to be granted accounted for about 1.30% of the company's total share capital at the time of the announcement of the draft incentive plan. According to the plan, the corresponding assessment targets for the first, second, and three attribution periods are to achieve operating income of 640 million, 835 million, and 1.09 billion yuan in 2023, 2024, and 2025, respectively, with corresponding revenue growth rates of 35%, 30%, and 31%, respectively. Meanwhile, on July 17, 2023, the company passed a board resolution to begin repurchasing the company's shares, demonstrating confidence in the company's development.

A number of new strategic partnerships have been reached, and the brand effect has been strengthened. In the third quarter of 2023, the company reached a number of important strategic cooperation: 1) reached a strategic cooperation with Heyuan Biotech in July to apply CGT core reagents such as the company's recombinant protein and GMP cytokines to Heyuan Biotech's biologics production and clinical stages; 2) In July, it reached a strategic cooperation with Chengdu Useno Biotech to establish long-term strategic cooperation in GMP grade core raw materials supply, joint development of next-generation general immune cell therapy core technology and customized products, marketing and pipeline asset transactions; 3) reached a strategic cooperation with Orange Fan Pharmaceutical in September to provide a full range of services Process solutions to accelerate their drug development and marketing process.

Profit forecast and investment rating: The company's net profit for 2023-2025 is estimated to be 206 million, 258 million and 333 million yuan respectively, corresponding to EPS of 1.72, 2.15, and 2.78 yuan respectively, maintaining the “buy” rating.

Risk warning

1. Industry competition increases risk;

2. Risk of failure in new product development;

3. The progress of internationalization has fallen short of expectations.