Incident: The company announced its full year results for 2023, achieving revenue of 40.34 billion yuan (YOY +2.51%), achieving net profit of 9.607 billion yuan (YOY +9.00%); achieving net profit deducted from non-mother of 9.748 billion yuan (YOY +16.81%); steady performance growth was in line with expectations.
The company's various businesses are developing steadily. In 2023, Q4 achieved revenue of 10.799 billion yuan (YOY -1.47%); realized net profit of 1,530 billion yuan (YOY +6.58%); and realized net profit of non-return to mother of 2,038 billion yuan (YOY +0.5%). Looking at the whole year, the company's various businesses maintained a steady development trend: 1) the chemical business achieved revenue of 29.17 billion yuan (YOY +1.1%), a year-on-year increase of 36.1% after excluding COVID-19 commercialization projects; 2) the testing business achieved revenue of 6.540 billion yuan (YOY +14.36%); 3) the biology business achieved revenue of 2,553 billion yuan (YOY +3.13%); the CTDMO business achieved revenue of 1.31 billion yuan (YOY +0.12%); DDSU achieved revenue of 726 million yuan (YOY -25.08%). Mainly due to business transformation.
The chemical small molecule CDMO business is growing strongly. The company's overall chemical business has maintained steady growth, mainly affected by weak global early R&D demand and a high revenue base due to COVID-19 commercialization projects in the same period last year. Specifically, revenue related to drug discovery increased 6% year on year, down 25.3pp from 2022; revenue related to process development and production business fell 0.1% year on year, but after excluding COVID-19 commercialization projects, revenue increased 55.1% year on year, mainly benefiting from the addition of 1,255 new molecules, and the number of commercialization projects increased from 50 in '22 to 61. The company's newcomer's business capacity was further strengthened. Relevant revenue increased 64.4% year over year to 3.41 billion yuan, and on-hand orders increased 226% year over year. The volume of the company's peptide reactor has also expanded rapidly, from 6KL in 2022 to 3.2wL in 2023, which can effectively meet the industry's rapidly expanding peptide production needs.
Profit forecasting, valuation and rating: The company is a one-stop CXO leader with steady performance growth. Taking into account the weak demand for global biomedical R&D and the slump in domestic investment and financing, the 24-25 net profit forecast was lowered to 109.5/12.76 billion yuan (6%/14%, respectively), and the net profit forecast for 26 years was 14.41 billion yuan, up 14.01%/16.52%/12.89% year-on-year, respectively. The PE for A-shares was 14/12/10 times for 24-26, maintaining the “buy” rating; H shares maintained a “buy” rating; the PE for 24-26 was 10/9/8 times.
Risk warning: Pharmaceutical companies' R&D investment falls short of expectations; increased competition; geopolitical risks.