The profit side performed well, and customer service was both broad and deep. As a leading enterprise in the CDMO industry, the company relies on its high-tech value-added process R&D capabilities and large-scale production capabilities to actively seize industry growth opportunities. It operates in 90+ countries and regions around the world, has more than 800 partners, and has established long-term cooperative relationships with major international pharmaceutical companies such as Novartis, Zoetis, and Roche. In recent years, the company's business has expanded rapidly. In 2018-2022, the CAGR of net profit to mother exceeded 50%; in 2023Q1-3, the company achieved net profit of 967 million yuan, an increase of 30.08% over the previous year, and the net sales interest rate increased to 21.07%.
A rich and reasonable CDMO project structure promotes long-term steady growth in performance, and the construction of R&D platforms for new technologies such as peptides and ADCs is accelerated. The company continues to advance the strategy of “deepening” large customers and “expanding” emerging customers, and orders and projects are growing steadily; as of 2023H1, 29 projects have been listed, 66 phase III clinical projects, and 839 phase I/II clinical trials. The company's peptide platform has undertaken and delivered a number of customized peptides and new peptide drug IND commissioned research and development services to help customers report multiple projects at home and abroad; in the future, Ruibo Suzhou peptide GMP workshop will be built, and the company will build a one-stop service platform from R&D to commercial production of peptide drugs. In terms of the XDC business, the company has completed the construction of an R&D platform. PDC, SMDC, etc. can complete the development and production of entire molecules, ADC and RDC can complete R&D and production of corresponding linkers, small molecule toxins, etc. (excluding antibodies and nuclides); the OEB5 workshop has been put into use and has begun to accept business orders.
Integration of APIs and formulations to achieve a new increase in product value. The company is one of the world's major suppliers of raw materials such as carbamazepine, oxcarbazepine, ketoprofen and glizide, and continues to develop new strategic customers and new product lines while stabilizing its leading position in the industry. Furthermore, in recent years, the company has basically completed the layout of the entire pharmaceutical industry chain through “acquisition+self-construction”. The Zhongshan plant has begun to undertake a number of innovative drug formulation projects, including overseas Phase III projects; by making full use of Kangchuanji Pharmaceuticals' generic drug consistency evaluation capabilities and the Zhongshan plant's pilot and commercial production capacity, the company accelerated acceptance of generic drug CRO business; at the same time, in the first half of '23, the company obtained approval for carbamazepine sustained-release tablets and glizide extended-release tablets.
Investment advice
We expect the company's net profit to be 12.02/14.99/1,835 billion yuan respectively, up 30.51%/24.68%/22.45% year over year, and EPS of 1.34/1.67/2.04 yuan respectively. The corresponding PE is 18/15/12 times, respectively, covered for the first time, giving it a “buy” rating.
Risk warning
Market competition risk; risk of exchange rate fluctuations; risk of service's main innovative drugs being delisted or being recalled on a large scale; risk that sales of major innovative service drugs fall short of expectations.