Core views:
Take advantage of the global industrial chain layout to seize new business opportunities. According to the company's annual report, the company achieved revenue of 40.3 billion yuan in 2023, up 2.5% year on year, excluding COVID-19 commercialization projects; adjusted non-IFRS net profit of 10.9 billion yuan, up 15.5% year on year; and adjusted non-IFRS net interest rate in 2023 was 26.9%, up 3.0 pct year on year. The gross profit margin of the main business was 41.17%, up 3.88pct from the same period last year. Improved operating efficiency and changes in the project portfolio combined with positive effects on exchange rates contributed to the increase in gross margin.
Continuously improve business capabilities, and show business resilience under damage to prosperity. According to the company's annual report, looking at the split business, the chemical business achieved revenue of RMB 29.171 billion, up 1.12% year on year; the testing business achieved revenue of RMB 6.540 billion, up 14.36% year on year; the biology business achieved revenue of RMB 2,553 billion, up 3.13% year on year; the CTDMO business achieved revenue of 1.31 billion yuan, up 0.12% year on year; DDSU achieved revenue of RMB 726 million. Affected by active iterative business upgrades, revenue decreased 25.08% year on year.
Develop each business in a balanced manner to seize industry development opportunities. According to the company's annual report, by the end of 2023, TIDES had a significant year-on-year increase of 226% in the CTDMO business. In the CTDMO business, in June 2023, the company signed an LVV production order for commercial CAR-T products, which is undergoing process verification, and production is expected to begin in the first half of 2024. A commercial CAR-T is expected to complete process validation in the first half of 2024 and be declared to the FDA in the second half of 2024.
Profit forecasting and investment advice. The company is in a steady state of growth, the core business growth is still promising, and the leading edge is remarkable. The company's net profit for 24-26 is estimated to be $9.641 billion, $10.928 billion, and $12.327 billion, and EPS is 3.29 yuan/share, 3.73 yuan/share, and 4.20 yuan/share, respectively. Refer to comparable companies in the industry, and give the company a 24-year 20XPE valuation, with a reasonable value of 65.74 yuan/share for corresponding A shares; with reference to AH premium, the corresponding reasonable value of H shares is HK$63.93 per share; maintaining the “buy” rating.
Risk warning. Risk of order fulfillment falling short of expectations, risk of international trade friction, exchange risk, etc.