Report summary:

Novizan is a biotechnology company that conducts technology research and product development around functional proteins such as enzymes, antigens, and antibodies, and polymer organic materials. Relying on its deep R&D advantages, the company has now become a leading enterprise in the molecular biological reagent industry. As the company continues to increase investment in R&D, the company's product pipeline continues to be enriched. Currently, the company has more than 300 types of genetically-engineered recombinant enzymes and more than 1,200 kinds of high-performance antigens and monoclonal antibodies, etc., and has more than 1,500 terminal products, covering the different needs of downstream industrial users and scientific research users in the life science industry chain.

The conventional biopharmaceuticals business is growing rapidly, and the company is gradually improving the layout of the industrial chain. Over the years of development, the company has continuously optimized its technology platform and enriched product pipeline. Looking at specific businesses, conventional biological reagents (life science business) achieved a compound growth of 48.73% in 2018-2022. According to Sullivan's data, in 2021, the company accounted for more than 20% of the domestic molecular enzyme market, and the company has become the leading enterprise among domestic enterprises. In 2016, the company established an in vitro diagnostic division and began downstream business expansion. Eight series of POCT diagnostic reagents were launched, and the company gradually developed into one of the companies with the most complete range of infection marker products. By the end of 2022, the In Vitro Diagnosis Division had obtained a total of 108 medical device registration certificates and registration certificates. In 2019, in order to further expand product application scenarios, the company established a biomedical division. The sector focuses on R&D and innovation around the three product lines or services of new drug development reagents/vaccine evaluation reagents, vaccine clinical CRO services, and vaccine raw materials. The number of customers has repeatedly reached new highs, and the number of customer orders and repurchase rates has continued to increase.

Overall, we believe that at present, the company has established multi-dimensional barriers such as a strong technology platform, a rich product matrix, and good brands in the industry. Under the policy of domestic substitution, it is expected to maintain a relatively rapid growth rate in the next few years.

Profit forecast and investment advice: In light of changes in the COVID-19 nucleic acid testing market, we have adjusted the company's profit expectations. We expect the company's operating income from 2023 to 2025 to be 1,310 billion yuan, 1,619 billion yuan, 2,066 billion yuan (original forecast amounts were 1,469 million yuan, 1,944 billion yuan, 2,625 million yuan); corresponding net profit was 0.2 billion yuan, 264 million yuan, 376 million yuan, 654 million yuan, (original forecast amounts were 241 million yuan, 466 million yuan, 654 million yuan); maintain the “buy” rating.

Risk warning: Product development risk, increased market competition risk.