Incidents:
The company announced its 2023 performance forecast. According to the company's forecast, the company expects a profit of 123-146 million yuan in 2023, an increase of 69.86%-101.63% over the same period of the previous year, and is expected to deduct non-profit of 1.04-124 million yuan, an increase of 55.41%-85.30% over the previous year. The company's annual results are in line with market expectations.
Key points of investment:
The overall business performance of the company was good in 2023. According to the company's 23-year performance forecast, the company's net profit attributable to shareholders of listed companies is expected to increase year-on-year mainly because the company closely revolves around the established development strategy in 2023, actively promotes the implementation of the annual business plan, concentrates the company's superior resources to promote core business development, accelerates the pace of enterprise informatization upgrading, and continuously improves core service capabilities. As the interference of the external business environment on clinical trial projects was gradually eliminated or weakened, the company's project business progress and execution efficiency recovered greatly in 2023, helping to increase the company's main business revenue and gross margin level, thereby increasing the net profit attributable to shareholders of listed companies in the current period.
New orders and in-hand orders have continued to grow rapidly. According to the company's 23 semi-annual report, the amount of new tax-free contracts signed by the company was 629 million yuan, an increase of 32.94% over the previous year. The increase in orders was mainly due to continuous investment in R&D capital by global pharmaceutical companies and the increase in demand for SMO services in clinical trials of new drugs by domestic and foreign pharmaceutical companies. As China's drug regulatory authorities reach a new level of drug quality management and the difficulty of developing new drugs continues to increase, the penetration rate of SMO in clinical pharmaceutical research and development has further increased. As of the end of the third quarter, the company's stock excluding tax contracts amounted to 1,754 billion yuan, an increase of 35.88% over the previous year.
Profit forecasting and investment ratings. As one of the earliest companies to develop the SMO business in China, the company resumed rapid growth after the pandemic. Orders continued to grow rapidly, and profit margins gradually recovered. Referring to the company's 23-year forecast, we raised our 23-25 net profit forecasts to 1.35, 1.69, and 212 million yuan (original values of 1.17, 1.46, and 207 million yuan), respectively. The corresponding PE was 24, 19, and 15 times, respectively, maintaining a “buy” rating.
Risk warning: risk of falling orders, risk of falling demand for pharmaceutical R&D services, risk of loss of core talent, etc.