Key points of investment
Incident: On March 25, 2024, the company announced its 2023 annual results announcement, with 2023 revenue of RMB 2,124 million (+114.4%, same in parentheses), net profit of RMB 284 million (+82.1%), and adjusted net profit of RMB 412 million (+112.1%). 2023H2 had revenue of $1,130 million (+71.0%), net profit of $106 million (+85.1%), and adjusted net profit of $196 million (+129.2%).
The revenue performance of various phase projects and regions was outstanding: by project, as of 2023.12.31, the total number of drug discovery phase projects implemented by the company was 427 (+43%); the number of comprehensive CMC projects in progress was 143 (+52%), including 84 pre-clinical projects (+47%, 77 ADCs, 7 XDCs), 38 clinical phase I projects (+41%), 13 phase II projects (7 in 2022), 8 phase III projects (including 5 PPQ projects in 2022) A total of 3 Phase III projects), with a total of 59 clinical projects (+59%, 52 ADCs, 7 XDCs); the company advanced a total of 17 projects from the pre-clinical development stage to the early clinical stage in 2023, and has transferred a total of 47 external projects to the company through the “win molecule” strategy. By region, in 2023, North America's revenue was 852 million yuan (+91.5%, business accounting for 40.1%), China's revenue was 661 million yuan (+116.0%, business accounting for 31.1%), and European revenue was 498 million yuan (+184.0%, business accounting for 23.4%); by project stage, pre-IND service revenue was 927 million yuan (+143.2%, business accounting for 43.6%), and post-IND service revenue was 1,197 million yuan (+96.6%, business accounting for 56.4%).
Multiple factors are expected to drive the company's performance to maintain high growth: ① The number of projects at all stages of the company is expected to grow rapidly, and the company is expected to welcome commercial projects in 2024, and the company has orders of 579 million US dollars (+81.9%) as of 2023. With the discovery of new ADC targets and the development of dual anti-ADC, ADC combination therapy and XDC, the ADC industry is expected to maintain a high boom, driving the company's high performance growth; ② The number of customers will increase dramatically from 265 in 2022 to 345 in 2023. By value calculation, 6 of the world's top ten pharmaceutical companies have cooperated with the company, accounting for 24% of the company's total revenue. The high-quality customer base and “winning molecules” strategy will continue to enrich the company's project funnel; ③ The company's production capacity will be further expanded, and the Wuxi kilogram connector and payload production line will be launched in December to perform integrated functions, and production capacity will gradually increase in 2024-2026 to meet the growth in customer demand while reducing outsourced production of bioantibodies to pharmacological agents. ; ④ Pharmaceutical Federation is the only global participant with comprehensive ADC CRDMO capabilities. It has high-quality technical capabilities and production capacity. Currently, global customer choices are limited, and the company's revenue in the North American region is still accelerating in 2023H2, which is relatively less affected by geopolitics.
Profit forecast and investment rating: Taking into account the rapid growth in downstream demand, we raised the company's 2024-2025 revenue from RMB 28.54/4.339 billion to RMB 31.68/4.440 billion yuan, with an estimated revenue of RMB 6.30 billion in 2026; net profit was raised from RMB 596/943 million to RMB 626/959 million yuan, which is expected to be RMB 1.32 billion in 2026. The current stock price is 31/21/15 × for 2026, maintaining the “buy” rating.
Risk warning: geopolitical risks, drug development and commercialization falling short of expectations, increased competition, etc.