Revenue was resilient, and profit margins exceeded expectations: the company's revenue in 2023 was $840 million, +34.2% year over year, in line with our previous forecast of $843 million; adjusted net loss of $298 million (vs. net loss of 359 million in 2022) was significantly less than our estimate of $395 million. The overall gross profit margin was 48.8% (+0.2pptYOy), exceeding our expectations of 46.5%, mainly due to the rapid increase in gross margin in the cell therapy sector. We believe that in 2023, when the industry fluctuates, the company's non-cellular therapy business still recorded steady growth of nearly 10%, fully reflecting its strong resilience as an industry leader. Standing in the present, the hardest year for the company may be over. As overseas financing gradually picks up in 1Q24, BoboBio completes team optimization, and overseas market development accelerates, we expect the CDMO business to improve in 2024, and there is a high possibility that it will surpass the company's guidelines.
Performance and guidance for various segments of the non-cellular business: 1) Life science services: external revenue of 405 million, +16% year over year, slightly exceeding our expectations, adjusted gross profit margin of 54.4% (-1.4ppts YoY); 2024 guidance: 15-20% revenue growth, and gross margin stabilized at around 55%. 2) Strong: External revenue of 107 million, -11% YoY, lower than our expectations, adjusted gross profit margin of 18.1% (-16.1ppts YoY, affected by reduced capacity utilization, fluctuations in service prices, impairment in disposable raw material inventory, etc.); 2024 guidance: revenue remains flat, and investment is preparing for a further acceleration in order growth. 3) Best J:
External revenue of $43 million, +12% year over year, slightly exceeded our expectations, with an adjusted gross profit margin of 38.5% (-4.4 ppts YoY, gross margin of about 40% for core enzyme preparations); 2024 guidance: Revenue increased 20-30% at a fixed exchange rate (CER), and gross margin/operating margin stabilized at around 39%/4-5%, respectively.
Cell therapy is gaining momentum: the company continues its guidelines: 1) peak sales of cilta-cel will reach at least $5 billion; 2) Production capacity will reach 10,000 doses by the end of 2025, and clinical production has begun at Ghent's new plant, doubling the cell processing capacity compared to the beginning of 2023; 3) CARTITUDE-5 enrollment was completed in 1H24. Subsequent pipelines focus on LB1908 (Claudin 18.2) and LB2103 (BCMA Car-γdelta T).
Increase profit forecast and target price: We slightly lowered 2024-25E revenue by 0.6%/0.5%, but based on higher operating margin assumptions, the 2024E net loss forecast was reduced by 4%, and 2025E net profit increased from 940 million to 1.48 billion. At the same time, we first introduced a profit forecast for 2026: revenue of US$2.16 billion (2023-26E CAGR 37%) and net profit of 174 million yuan.
Based on the Segment Summarization (SOTP) valuation, the company's latest target price of HK$27.75 was obtained, maintaining the purchase rating.