Key points of investment:
Heparin APIs are expected to rebound and join forces with Makihara to move towards high-end production. 1) Heparin APIs have cyclical properties. As of December 2023, the price of heparin has fallen back to 5,356 US dollars/kg, which is basically the same as the price level of heparin in 2018. It is already in the bottom range of the second heparin cycle. It is expected that a new heparin price upward cycle will begin in 2024. The company has no inventory pressure on heparin APIs, and sales are stable. The gross margin of the API sector is expected to increase significantly. 2) The company cooperated with Muyuan Co., Ltd. to establish Henan Qianmu to create a high-end heparin API. Henan Qianmu established a modern one-stop production line from breeding to slaughter to processing. It is expected to be put into operation by the end of 2024 to provide the company with sufficient upstream heparin raw materials to ensure high-quality traceability of the industrial chain. It is expected to enter the original research industry chain and continuously improve profit margins.
The advantages of standard heparin preparations are obvious, and the amount collected and released of enoxaparin preparations increases the penetration rate. There is a clinical shortage of standard heparin preparations. The company's standard heparin sodium preparations accounted for the largest share of sales in sample hospitals, and the market advantage was obvious. Heparin sodium encapsulated injections quickly seized market share, and sales have grown rapidly since launch, and are expected to become a new growth point for common heparin sodium preparations. Currently, the company's market share of enoxaparin sodium injections is low. The sample hospital's sales share in 2022 was 2.92%. In April 2023, the eighth batch of national collection company enoxaparin sodium injections won the bid. It is expected that the market share will be increased through collection and release. The company won the bid price is high, and the profit margin is still large.
Protease products have obvious advantages and are actively exploring the market. The company's pancreatic kinin enzyme accounts for the largest share of sales in sample hospitals, maintaining a market share of over 80%, a wide range of indications, and strong end-user stickiness. Injections are exclusive products, with obvious competitive advantages and a rapid growth trend. Compound digestive enzymes account for the second largest share of sales in sample hospitals. A cooperation agreement has now been reached with Bayer. The Bayer sales team will accelerate the expansion of the OTC market and is expected to become another major product of the company.
Innovative drug development is progressing smoothly, creating a second growth curve. QHRD107 (CDK9 inhibitor) is an innovative drug independently developed by the company to treat AML. Phase II clinical progress is progressing smoothly, the domestic target progress is leading, the oral dosage form is safe, and the market competition pattern is good. It is expected that it will be marketed with conditions in the future with good clinical data. QHRD110 (CDK4/6 inhibitor) has basically completed phase I clinical trials in Australia. In the near future, clinical bridging tests will be carried out domestically. This variety can break through the blood-brain barrier. Compared with similar domestic products, the company differentiates glioma indications. In addition, the company is also steadily advancing products under development for various indications such as acute ischemic stroke and growth hormone deficiency, and is expected to open up the company's second growth curve in the future.
Investment advice: We expect the company's revenue for 2023-2025 to be 19.43/20.50/2,422 billion yuan, respectively, net profit to mother of 2.50/3.22/395 million yuan, corresponding EPS of 0.20/0.25/0.31 yuan, respectively, and corresponding PE of 26.39/20.48/16.69, respectively. This is covered for the first time, giving it a “buy” rating.
Risk warning: risk of heparin price fluctuations; risk of drug sales falling short of expectations; risk of drug development falling short of expectations.