Incidents:
The company released its 2023 annual report, and achieved revenue of 2,124 million yuan in 2023, an increase of 114% year on year; net profit to mother of 284 million yuan, up 82% year on year; adjusted net profit of 412 million yuan, up 112% year on year.
One-stop CRDMO platform empowers customers throughout the link
The company continues to help customers innovate and develop. By the end of 2023, the company had served a total of 345 customers, an increase of 80 over the end of 2022. 6 of the world's top ten pharmaceutical companies have cooperated with the company.
In 2023, the company's revenue from North America/ China/ Europe/ other regions was 8.52/ 6.61/4.98/ 113 million yuan respectively, accounting for 40.1%/31.1%/23.4%/5.4%/5.4%, up 91%/116%/184%/76% year-on-year respectively, with a balanced geographical distribution.
Ongoing projects continue to increase
Through the “Empower, Follow, and Win Molecules” strategy, the company's on-hand projects continued to grow. By the end of 2023, the company had orders of US$579 million and 570 projects in progress. Among them, the number of projects in the drug discovery, preclinical/phase 1 clinical phase 2/phase 3 stages was 427/84/38/13/8, respectively, an increase of 128/27/11/6/5, respectively. The company has 5 PPQ projects to verify the production process for new drug marketing applications, which are expected to bring commercial orders to the company in the future.
Global production capacity construction is progressing steadily
In order to match the growing number of orders, the company continued to promote production capacity construction. In 2023, the company achieved GMP production standards for one-stop antibody intermediates, payload connectors, conjugated stock solutions, and conjugated preparations in the same park at the Wuxi base, and provided end-to-end production through the world's first dual-function production line to help customers shorten the project cycle and save production costs. As an important step in its internationalization strategy, the company started construction of a base in Singapore, which is expected to better serve global customers. The base is expected to be put into operation in 2026. It mainly serves clinical and commercial production projects, and is expected to meet the diverse needs of customers.
Profit Forecasts, Valuations, and Ratings
Considering the continued rise in the ADC industry's boom, we expect the company's revenue for 2024-2026 to be 31.58,45.59/6.332 billion yuan, respectively, with corresponding growth rates of 48.69%/44.36%/38.89%; net profit to mother of 5.89/9.14/1,328 billion yuan, respectively, corresponding growth rates of 107.74%/55.22%/45.28%; EPS is 0.49/0.76/1.11 yuan/share, respectively, and a 3-year CAGR of 67.32%. Considering that the company is the leading ADC CXO company in the world, based on comparable company valuations, we gave the company 50 times PE in 2024, corresponding to a target price of HK$26.65 (1HKD=0.9227 CNY), maintaining a “buy” rating.
Risk warning: industry competition intensifies; market demand falls short of expectations; geopolitical risks; capacity expansion falls short of expectations.