Incidents:
On March 28, the company released its 2023 annual report. In 2023, the company achieved operating income of 7.825 billion yuan, a year-on-year decrease of 23.70%. Revenue after excluding large orders was 5.405 billion yuan, up 24.37% year on year, net profit to mother was 2,269 billion yuan, down 31.28% year on year, and net profit after deducting non-return mother was RMB 21.04 billion, down 34.87% year on year.
Comment:
The main small molecule business is growing steadily, and the project pipeline continues to be enriched. The small molecule business achieved revenue of 6.620 billion yuan, an increase of 25.60% over the previous year after excluding large orders, and gross margin of 60.07%, an increase of 9.53% over the previous year, mainly related to higher gross profit, exchange profit and loss, and efficiency improvements for large orders. Specifically, commercialization projects achieved revenue of 5.112 billion yuan, which was 2,692 billion yuan after excluding large orders, an increase of 47.13% over the previous year; clinical projects achieved revenue of 1,507 billion yuan, which was basically the same as the previous year after excluding COVID-19 projects. In addition, the project pipeline continues to be enriched. By the end of 2023, there were 40 commercialized projects, 69 phase III clinical projects, and 317 pre-clinical and early-stage projects.
Emerging businesses continue to grow and are poised for the future. The emerging business achieved revenue of 1,199 billion yuan in 2023, a year-on-year increase of 20.42%, gross margin of 26.48%, a year-on-year decrease of 7.20%, mainly due to the continued slump in the domestic and foreign biomedical financing environment. Specifically, the chemical macromolecule CDMO business increased 8.76% year over year, with 74 new development customers and 80 new projects; clinical business revenue decreased 7.44% year over year, undertook 347 new projects and undertook 33 integrated orders; formulation CDMO business increased 18.36% year over year, completed 148 projects, and the number of new orders signed increased 50% year over year.
Technology drives continuous investment in R&D, and the senior talent team continues to expand. The company is committed to “technology-driven” as its core competitiveness. In 2023, R&D investment was 708 million yuan, accounting for 9.05% of revenue. By the end of 2023, it had authorized 383 domestic and foreign patents, and eight major technology platforms, including continuous science and synthetic biology, were continuously iterated. In addition, the company continues to expand its senior workforce. In 2023, 83 PhDs, 29 executives and above, and 93 overseas returnees were introduced.
Profit forecast and investment advice: We expect the company's revenue from 2024 to 2026 to be 69.48/89.11/11.454 billion yuan, up -11.2%/28.3%/28.5% year on year; net profit to mother will be 17.63/23.53/2,951 billion yuan, up -22.3%/33.4%/25.4% year on year, corresponding to current PE 19/14/11X, respectively, and continue to give a “buy” rating.
Risk warning: the risk of new orders or new projects falling short of expectations, the risk of new business or new customer expansion falling short of expectations, the risk of increased competition, the risk of exchange rate fluctuations, the risk of insufficient production capacity investment, and geopolitical risks.