Incidents:
The company released its 2023 annual report. In 2023, it achieved revenue of 2,376 million yuan, a year-on-year increase of 4.78%, net profit to mother of 397 million yuan, a year-on-year decrease of 63.04%, and net profit after deducting 338 million yuan, a year-on-year decrease of 66.89%.
Overseas performance is growing at a high rate, and domestic short-term pressure is on
Affected by the decline in domestic industry sentiment, the company vigorously expanded its overseas business. In 2023, the company achieved domestic revenue of 1,798 billion yuan, a year-on-year decrease of 4.64%; achieved overseas revenue of 579 million yuan, an increase of 51.20% over the previous year. Among the various business segments, drug non-clinical research services achieved revenue of 2,309 billion yuan, an increase of 4.31% year on year; clinical service-related business achieved revenue of 63.42 million yuan, an increase of 27.95% year on year; and experimental model supply business achieved revenue of 4.06 million yuan, a year-on-year decrease of 15.41%. By the end of 2023, the company still had orders of 3.3 billion yuan in hand, providing a strong guarantee for future performance growth.
Production capacity construction is progressing steadily
The company continues to promote production capacity construction, and the new production capacity is expected to guarantee the company's medium- to long-term development. By the end of 2023, the company had more than 100,000 square meters of experimental facilities in China and the US, of which the 20,000 square meter facility in the Suzhou Zhaoyan Phase II has been capped, and 22,000 square meters of supporting facilities are expected to be completed and gradually put into use in 2024; the Zhaoyan Yichuang non-GLP laboratory, a wholly-owned subsidiary focusing on the screening of new drugs, has been completed and officially put into use; the construction of the Guangzhou Zhaoyan Security Assessment Base is progressing in an orderly manner; the Chongqing base is in the planning and design stage.
Profit Forecasts, Valuations, and Ratings
Considering that the current industry boom is under slight pressure, we expect the company's revenue for 2024-2026 to be 24.42/26.81/3.062 billion yuan, corresponding growth rates of 2.74%/9.80%/14.20%, respectively; net profit to mother will be 445/543/622 million yuan, corresponding growth rates will be 12.05%/22.07%/14.60%, EPS 0.59/0.72/0.83, respectively, and a 3-year CAGR of 16.16%. The company is a leading preclinical CRO company in China. It has extensive experience in safety assessment business, and overseas revenue continues to expand. It is recommended to keep an eye on it.
Risk warning: geopolitical risk; increased industry competition; industry demand falling short of expectations; risk of fluctuating laboratory animal prices; social responsibility risk.