Incident Overview
Company Announces 2023 Annual Report: 23 Achieved operating income of 7.825 billion yuan for the full year, a year-on-year decrease of 23.70%, realized net profit to mother of 2,269 billion yuan, a year-on-year decrease of 31.28%, and realized deduction of non-net profit of 2.104 billion yuan, a year-on-year decrease of 34.87%
Analytical judgment:
Revenue was in line with market expectations, and the commercial business showed rapid growth after excluding large orders
The company achieved revenue of 7.83 billion yuan in 23, down 24% year on year. After excluding large orders, revenue was 5.4 billion yuan, up 24.4% year on year, of which the small molecule business was 4.2 billion yuan, up 25.6% year on year, and new business was 1,199 billion yuan, up 20.4% year on year. Performance growth was in line with market expectations, and the small molecule CDMO business continued its rapid growth trend after excluding large orders.
As of the disclosure date of the 23rd annual report, excluding the order amount of confirmed revenue during the reporting period, the company's total order amount was US$884 million, which guarantees the certainty of future performance growth to a certain extent.
(1) After excluding large orders, the multinational pharmaceutical business and commercialization business maintained rapid growth: in '23, the company's revenue from large multinational pharmaceutical companies was 4.988 billion yuan, and revenue after excluding large orders was 2,568 billion yuan, up 75.13% year on year, continuing the rapid growth trend. Additionally, revenue from small and medium-sized pharmaceutical companies was 2,837 billion yuan, down 1.47% year on year. We judge that it was mainly affected by global investment and financing boom factors. The company confirmed revenue for 40 commercialization projects in '23, achieving revenue of 5.112 billion yuan, and revenue of 2,692 billion yuan, a year-on-year increase of 47.13%, continuing the rapid growth trend. In addition, the number of the company's clinical-stage projects continued to grow. In particular, during clinical phase III, it had reserves of popular target molecules involving GLP-1, KRAS, JAK, TYK2, EGFR/HER3, BTK, CDK4/6, etc., providing a project foundation for continuing to receive major commercial orders. Looking forward to the future, the company's performance is expected to grow rapidly as major commercialization projects continue to be implemented.
(2) The new business has shown steady and rapid growth in 23 years, and is expected to continue to contribute to performance flexibility in the future. In '23, the company's emerging business segment achieved revenue of 1,199 billion yuan, up 20.42% year on year. Among them, revenue from the chemical macromolecule segment increased 8.76% year on year, revenue from the clinical research service sector decreased 7.44% year on year, revenue from the pharmaceutical business segment increased 18.36% year on year, and revenue from the biopharmaceutical macromolecule CDMO business increased 31.29% year on year. In addition, the synthetic biotechnology business and technology export capabilities continued to be realized. Holistic business capacity building is expected to lay the foundation for future growth in the company's performance.
Accelerate peptide production capacity construction and overseas production capacity strategic reserves to add certainty to future performance growth
(1) Accelerate commercial peptide production capacity construction to add certainty to future performance growth: the company's chemical macromolecule production workshop 1 was successfully put into operation in '23, with 10 pilot-commercial oligonucleotide production lines with a synthesis capacity of 500 Kg/year, and accelerated commercial peptide production capacity construction. As of the disclosure date of the 23rd annual report, the company's total solid phase synthesis production capacity was 10,250 liters, which is expected to reach 14,250L by the end of June 2024 to meet customers' commercial solid phase peptide production needs and increase the certainty of future performance growth.
(2) The FY24 business plan focuses on speeding up overseas production capacity: in Europe, it is planned to obtain API commercial production capacity for small chemical molecules and chemical macromolecules through self-construction or mergers and acquisitions, and build laboratories and pilot production bases to deepen the depth of cooperation with overseas customers, especially multinational pharmaceutical companies; accelerate the construction of the Boston R&D center to drive the development of American Biotech customers.
Investment advice
As a leading small-molecule CDMO supplier in China, the company looks forward to continuing to further develop small-molecule “intermediates+API+ formulations” integrated service capabilities in the future. Furthermore, it will continue to strengthen its layout in the field of synthetic macromolecules and biomacromolecules to protect the company's medium- to long-term performance growth. Taking into account factors such as the impact of large order confirmation and increased profitability and the continued downturn in the domestic and foreign investment and financing environment, the profit forecast for the previous period was adjusted, that is, the 24-26 operating period was adjusted from 83.97/105.36/NA 100 million yuan to 6.518/79.24/9.464 billion yuan, and EPS was adjusted from 4.76/6.28/NA yuan to 3.39/4.13/4.95 yuan, corresponding to the closing price of 86.04 yuan/share on March 29, 2024, PE was 25/21/ 17x, maintaining a “buy” rating.
Risk warning
Risk of loss of core technical backbone and management, risk of increased competition, risk of loss of core technical personnel, risk of exchange rate fluctuations