Introduction to this report:
The non-COVID-19 business is growing steadily, and the peptide business continues to contribute to growth. It is optimistic about long-term growth space and maintains an increase in holdings rating.
Key points of investment:
Maintain an “Overweight” rating. The company's revenue in 2023 was $40.34 billion (+2.5%), and adjusted non-IFRS net profit of 10.09 billion yuan (+15.5%), in line with expectations. Considering geopolitical risks and the potential subsequent impact of the Biological Act, the 2024-2025 EPS forecast was lowered to 3.34/3.85 (originally 3.75/4.46 yuan), and the 2026 EPS was added by 4.36 yuan. Referring to comparable company valuations, the 2024 PE20X was given, and the target price was lowered to 66.80 yuan (originally 78.96 yuan) to increase the holding rating.
The non-COVID-19 business is growing steadily. Revenue reached 40 billion dollars for the first time in 2023, and adjusted non-IFRS net profit to mother broke 10 billion for the first time. Chemical business revenue of 29.17 billion yuan (+1.1%), excluding COVID-19 commercialization; testing business revenue was 6.54 billion yuan (+14.4%), drug safety evaluation increased 27.3% year over year, and SMO business increased 26.1% year on year, maintaining leading position; biology business revenue of 2.55 billion yuan (+3.1%), driven by new molecular types, increased 26% year over year; ATU sector revenue of 1.31 billion yuan (+0.1%), signed a commercial CAR-T product in June 2023 LVV production orders are expected to begin production in the first half of 2024, and the second commercialization project was approved in February 2024; DDSU's revenue was 730 million yuan (-25.1%), and sales share exceeded 0 to 1.
The peptide business continues to contribute to growth. TIDES's business revenue in 2023 was 3.41 billion yuan (+64.4%). As of the end of 2023, TIDES's on-hand orders increased 226% year over year. D&M served 140 customers (+36%) and served 267 service molecules (+41%). The production capacity expansion project was completed at the Changzhou and Taixing bases. The new production capacity was put into use in January 2024, and the volume of the peptide solid phase reactor increased to 32,000 liters.
The accelerated development of the peptide business opens up room for long-term growth.
Catalysts: Emerging businesses contribute to performance; traditional business operation efficiency is further improved.
Risk warning: risk of economic cycle and policy changes; geopolitical risk; risk of exchange rate fluctuations.