Event description: On October 27, 2023, the company released its report for the third quarter of 2023. 2023Q1-Q3 achieved operating income of 4.325 billion yuan, an increase of 13.31% over the previous year; realized net profit of 583 million yuan, a decrease of 3.48% over the previous year; and realized net profit of 539 million yuan, a decrease of 4.84% over the previous year. Looking at a single quarter, 2023Q3 achieved operating income of 1,374 billion yuan, a year-on-year decrease of 1.13%; realized net profit of 157 million yuan, a year-on-year decrease of 22.04%; and achieved net profit of 146 million yuan, a year-on-year decrease of 24.92%.
The impact of increased revenue structure+market competition is under pressure on the profit side. Changes in revenue structure compounded by increased market competition. Q3 had a gross profit margin of 36.73%, a year-on-year decrease of 1.0pct, a year-on-year decrease of 1.0pct, a year-on-year increase of 7.15%, a year-on-year increase of 2.64pct; the management expense ratio was 9.29%, a year-on-year decrease of 1.16pct; the R&D expense ratio was 7.67%, an increase of 1.85pct over the previous year. The external macroeconomic environment affected project progress and extended procurement cycles, and performance was under pressure. On the profit side, the company achieved a net profit margin of 11.5% in the single quarter of 23Q3, a year-on-year decrease of 3.1 pct, and net profit of 157 million yuan, a year-on-year decrease of 22.04%. Currently, the company promotes cost reduction and efficiency through standardized management, procurement cost management, and increased international market development.
Macro factors influence the progress of the project, and the overseas share is expected to increase further. In terms of business structure, in the first three quarters, the pharmaceutical division's revenue was 2,482 billion yuan, accounting for 57.4%; the bioprocess division's revenue was 989 million yuan, accounting for 22.87%; and the engineering division's revenue was 394 million yuan, accounting for 9.13%. Among them, revenue from life technology equipment and consumables products with high gross margins fell 27% year on year, and gross margin fell 13%, driving pressure on the profit side. Looking at the subregion, external macro-factors influence the progress of domestic projects; 23H1, the share of overseas revenue has increased to 19.7%, but due to the high complexity of export equipment for international products, the relatively large number of systematic orders, and the delivery cycle has been extended compared to domestic ones. In the future, as the company further improves its international layout and enhances technology and product competitiveness, the overseas share is expected to increase further.
The fund-raising project is progressing smoothly, and it is expected that production will be put into operation in 25-26. The company's fund-raising project is progressing smoothly. The biopharmaceutical equipment industry trial production center project has raised 530 million yuan and is expected to be put into operation in 2026; the Zhejiang Dongfulong Life Science Industrialization Base project has raised 860 million yuan, and the main construction has been completed and is expected to be put into operation in 2025; the Jiangsu biomedical equipment industrialization base project has raised 620 million yuan. Currently, all underground infrastructure construction of the plant has been completed and is expected to be put into operation in 2025. With the gradual implementation of fund-raising projects, it is expected to contribute a considerable increase in performance in the future.
Profit forecast and valuation: Considering factors such as increased competition in the industry and rising raw materials, we expect the company's 2023-2025 operating income to be 59.2/70.4/8.37 billion, with a year-on-year growth rate of 8%/19%/19%; net profit of 8/9/11 billion, with a year-on-year growth rate of -8%/19%/21%, corresponding PE of 20/17/14 times. Maintain a “buy” rating.
Risk warning: equipment sales fall short of expectations, product exports fall short of expectations, capacity expansion falls short of expectations