Incident: The company announced its 2023 results, achieving revenue of 17.03 billion yuan (YOY +11.6%); realized net profit of 3.40 billion yuan (YOY -23.1%), and achieved adjusted net profit of 4.95 billion yuan (YOY -2.0%), in line with expectations.
Comment:
The non-COVID-19 business is growing steadily, and the European business is expanding rapidly. Although the company's revenue growth rate declined from the previous period due to multiple factors in '23, revenue from the non-COVID-19 business maintained steady growth, increasing 37.7% year over year to 16.51 billion yuan. The number of new projects added by the company began to resume in the second quarter of '23, with 8/38/15/71 new projects added in each of the four quarters. Non-COVID-19 business developments by region, North America/Europe/China/other regions achieved year-on-year revenue growth of 20.2%/+172.4%/-1.2%/+37.7%, respectively. Europe has become a major contributor to the steady growth of the company's revenue.
Commercialization projects continue to grow, and ADC projects expand rapidly. The number of comprehensive projects in 23 years reached 698, and relied on the “win-the-molecule” strategy to win 18 external projects, including 7 phase III clinical projects and 2 commercialization projects. The company has commercialized 24 projects, of which 16 are non-COVID-19 projects (11 in 2022). Non-COVID-19 revenue from phase III and commercialized projects increased 101.7% year-on-year, indicating that the company's M-side (commercial production) is gradually gaining strength. In addition, the company's ADC business also maintained rapid growth. The number of projects increased 52.1% year over year to 143. Of these, 21 projects are in clinical phase II/III, and 5 PPQ projects are expected to submit new drug marketing applications soon.
Over the past 24 years, new projects have been gaining momentum, and overseas production capacity is gradually climbing. As of 2024.03.22, the number of new projects added by the company was 25, far higher than the 8 in Q1 last year. As the global biotech financing situation continues to improve and recover, and the Federal Reserve returns to the 24-year cycle of interest rate cuts, the CXO industry beta is expected to improve, and Pharmacom Biotech will also benefit from it. Furthermore, the production capacity of the company's Irish base climbed higher than expected, and is expected to achieve break-even in 24, with production capacity close to full production in 25. The decline in overseas capacity utilization will improve the company's gross margin level, and the company's profit side growth rate will be faster than the revenue side growth rate.
Profit forecasting, valuation and ratings: The company is the leading CDMO. Considering the recovery of global biotechnology investment and financing and the remaining uncertainty in the US Bio Act, the net profit forecast for 24-25 was lowered to 40.40/4.742 billion yuan (1.9%/15.4%, respectively), and the net profit forecast for the additional 26 years was 5.389 billion yuan, corresponding PE was 13/11/10 times, maintaining the “buy” rating.
Risk warning: The company's capacity expansion plan or falls short of expectations; the level of competition in the biopharmaceutical CDMO market is increasing; geopolitical risks may affect overseas revenue.