The company's endogenous conventional business revenue grew steadily in 23 years, maintaining that the “buy” rating company achieved revenue/net profit of 78.3/2.27 billion yuan (yoy -23.7%/-31.3%) in 23. Revenue was lower than our expectations (estimated revenue of 8.57 billion yuan), mainly due to the continued downturn in the global biomedical investment and financing environment during the period, which affected the release of customer demand. Excluding the impact of large orders, revenue yoy was +24.4% in 2012, and the company's endogenous regular business revenue grew steadily. As of the disclosure date of the annual report, the total number of orders in hand was US$874 million, and performance visibility continued to increase. Considering the impact of the slowdown in global investment and financing activities on the company's business and the increase in R&D investment, we adjusted the 24-26 EPS to 3.52/4.46/5.60 yuan (4.82/6.27 yuan before 24/25). The company is a leader in the CDMO industry, leading in technology and has plenty of on-hand orders. It gave A/H shares 33/21x PE for 24 years (A/H shares with a 24-year Wind average expected average of 23/19x), corresponding to a target price of 116.16 yuan/80.00 HKD (previous value 197.56 yuan/149.07 HKD, mainly considering the average PE correction of comparable companies), all maintaining “buying”.
Sales and R&D investment were strengthened, and the cash flow level continued to improve the company's 23-year gross profit margin of 51.2% (yoy+3.8pct), mainly due to high gross margin of large orders delivered later, exchange rate factors, and internal cost reduction and efficiency. With a 23-year sales/management/ R&D expense ratio of 2.5%/10.1%/9.0% (yoy+1.0/+2.2/+2.1pct), the company continued to increase sales and R&D investment.
The company's net operating cash flow for 23 years was 3.55 billion yuan (yoy +8.0%), and the cash flow continued to improve.
Small molecule CDMO: Regular business grew rapidly in the commercialization stage, and the total number of projects continued to increase the company's 23-year commercialization stage CDMO revenue of 5.11 billion yuan (yoy -32.6%, yoy +47.1% after excluding large orders), and clinical-stage CDMO revenue of 1.51 billion yuan (yoy -9.6%, basically the same year-on-year after excluding specific anti-virus projects), and the company's regular core business continued to develop positively. A total of 426 projects (yoy +6.8%) of the sector confirmed revenue in 23 years, including 40, 69, and 317 commercialization, phase III, and clinical I-II projects (40, 62, and 297 in VS 22), respectively. The number of projects undertaken in the sector continued to increase against the backdrop of poor phased investment and financing activities, demonstrating the company's strong market competitiveness. We are optimistic that the company's regular core business revenue will continue to grow steadily for 24 years.
Emerging services: multi-point business layout, continuing to contribute to performance growth
Emerging Services achieved a total revenue of 1.2 billion yuan (yoy +20.4%) in 23 years, including: 1) biomacromolecule CDMO: revenue yoy +31.3%, 71 projects in progress by the end of 23; 2) synthetic biotechnology: revenue yoy +38.1%, and the first batch of production of the first IND project was successfully delivered; 3) Formulations: revenue yoy +18.4%, of which overseas revenue yoy +20.5%; 4) Chemical macromolecules: revenue yoy +8.8%, added 80 new projects and focused on promoting oligonucleotide and peptide businesses Development; 5) Continuous response technology output: Revenue in the first year of commercialization exceeded 100 million yuan, with 19 new projects; 6) Clinical research services: Revenue yoy -7.4%. We estimate that the main reason is that increased competition in the domestic industry affects order prices, but businesses in fields such as CGT and rare diseases have maintained a strong momentum. We are optimistic that the overall development of emerging services will continue to improve over the past 24 years.
Risk warning: downstream product sales fall short of expectations, policy implementation falls short of expectations, risk of exchange rate fluctuations.