Description of the event
The company released its results report for the third quarter of 2023. In the first three quarters, it achieved operating income of 544 million yuan, an increase of 35.53% year on year; realized net profit of 101 million yuan, an increase of 164.05% year on year; and realized deducted non-net profit of 86 million yuan, an increase of 143.93% year on year.
Incident comments
Performance growth recovered, and net profit broke 100 million for the first time in the first three quarters. The 2023Q3 company achieved revenue of 195 million yuan in a single quarter, an increase of 25.07% year-on-year, slightly exceeding market expectations. At the same time, the company performed well on the profit side, achieving net profit of 101 million yuan in the first three quarters of 2023, breaking 100 million yuan for the first time, an increase of 164.05% over the previous year, mainly due to improved project execution efficiency.
2023Q3 achieved a gross profit margin of 33.69% in a single quarter, with a certain increase over the previous month, and the company's annual labor efficiency is expected to reach a new high. As of the first three quarters of 2023, the total number of employees in the company was 4,061, with nearly 3,900 professional business personnel. At the same time, many management members had more than 10 years of industry experience. Most of them had working experience in domestic and foreign pharmaceutical companies and SMO, and had a deep understanding of pharmaceutical R&D processes and management systems.
External interference was gradually eliminated, and project progress was fixed. In the third quarter of 2023, the company closely focused on the established development strategy and actively promoted the implementation of the annual business plan. As the business environment gradually eliminated or weakened interference with clinical trial projects, the company was customer-oriented, increased business development and brand promotion, consolidated business cooperation with high-quality and diversified customers, and project business progress was resumed. At the same time, the company is committed to undertaking SMO projects with innovative and high clinical value new drugs, and the number of SMO execution projects is also growing steadily. As of the first three quarters of 2023, the company has undertaken more than 2,800 international and domestic SMO projects and implemented 1,741 SMO projects.
The leading effect continues to show, and service recognition continues to increase. The company is a leader in the domestic SMO field. Using its rich project experience, the company is actively expanding the number of clinical trial institutions and cities. As of the first three quarters of 2023, the company has served more than 850 clinical trial institutions, covering more than 1,300 clinical trial institutions, and covering more than 180 cities across the country, which can meet the vast majority of customer project needs. The company provides clinical trial site management for customers such as international pharmaceutical companies or well-known domestic innovative pharmaceutical companies. It has outstanding service capabilities for high-quality innovative pharmaceutical companies. The SMO services it provides are of high quality and high efficiency, are at the advanced level of the same industry, and meet international standards.
Profit forecast: We expect the company to achieve net profit of 141 million yuan, 210 million yuan, and 287 million yuan in 2023-2025. The corresponding valuation of the current stock price is 28 times, 19 times, and 14 times, maintaining a “buy” rating.
Risk warning
1. The popularity of pharmaceutical research and development falls short of expectations;
2. Expansion of scale may bring personnel management risks.