Incident: The company released its 2023 annual report. In 2023, it achieved revenue of 17.03 billion yuan, a year-on-year increase of 11.6%; realized net profit of 3.4 billion yuan, a year-on-year decrease of 23.1%; adjusted net profit to the mother was 4.7 billion yuan, a year-on-year decrease of 4.6%, and revenue profit was in line with expectations.
Revenue and profit are in line with expectations, and non-COVID-19 projects have maintained steady growth. In 2023, the company's COVID-19 revenue was 530 million yuan (-83.9%) and non-COVID-19 revenue was 16.51 billion yuan (+37.7%); in stages, preclinical/early clinical (phase I, phase II) /clinical phase III and commercialization stages respectively achieved revenue of 54/36.2/7.73 billion yuan (+9.2%/+12.7%/+12.8%), of which non-COVID-19 clinical phase III and commercial revenue surged 101.7% year on year.
Pre-clinical revenue growth is expected to gradually resume as European and American biotech financing bottoms out and rebounds.
The number of new projects bottomed out and rebounded after 2023Q1. The number of new projects added in 2023 is one of the highest levels in history.
The number of new non-COVID-19 integrated projects added by the company was most affected by the slowdown in biotechnology financing in 2023Q1, and recovery has begun since Q2. Strong recovery in the second half of the year, with 8/38/15/71 new projects added in 2023Q1/Q2/Q3/Q4 respectively, totaling 132, the best level in history; as of March 22, 2024, the company had added 25 new projects. The drug development business is growing strongly, and the target number of new projects was raised from 80 to 110 in 2024.
The “winning element” strategy continues to gain strength, and unfulfilled orders will continue to drive future revenue growth. As of December 31, 2023, the company has received 18 external transfer projects, including 7 clinical phase III projects and 2 commercialization projects; milestone and research service revenue of over US$87 million, demonstrating R-side business resilience; 51 clinical phase III projects and 24 commercialization projects have laid a solid foundation for the company's future commercial production revenue growth. The total amount of uncompleted orders was about US$20.6 billion, and uncompleted service orders were about US$13.4 billion (a slight decrease from the previous year, affected by the cancellation of orders for some COVID-19 projects); uncompleted potential milestone payment orders reached a record high of about US$7.2 billion; and uncompleted orders of about US$3.9 billion within three years, consolidating recent revenue growth expectations.
Production capacity climbed ahead of expectations, opening a new chapter in global operations. The company officially started construction of the Singapore Integrated CRDMO Center, which covers an area of 13.5 hectares and has a planned production capacity of 12 wL. It will provide integrated biopharmaceutical research, development and production services. Production capacity at the Irish base climbed better than expected. It is expected to achieve break-even in 2024, one year ahead of schedule; there will be a large amount of commercial production demand starting in 2024, and production capacity will be close to full production in 2025.
The company's CRDMO bases around the world include 3 drug discovery centers (R), 8 drug development centers (D), 9 production sites (M), and multi-pole enabling partners in many places.
Profit forecast: The company's net profit for 2024-2026 is expected to be RMB 38.1, 45, and RMB 5.29 billion, respectively, and EPS of 0.90, 1.06 and 1.24 yuan, respectively, and the corresponding PE is 16, 14, and 12 times, respectively.
Risk warning: risk of industry growth falling short of expectations; risk of project progress falling short of expectations; risk of foreign investment income volatility; policy risk; risk of exchange rate fluctuation, etc.