Description of the event
The company released its 2023 annual report. In 2023, it achieved revenue of 40.341 billion yuan, an increase of 2.51% year on year; realized deducted non-net profit of 9.748 billion yuan, an increase of 16.81% year on year; achieved adjusted non-IFRS net profit of 10.855 billion yuan, an increase of 15.5% year on year.
Incident comments
Front-end demand needs to be restored, and back-end growth remains high. Looking at the split business, 1) the growth rate of front-end businesses, such as drug discovery and biology businesses, is slowing down. The drug discovery business continues to drain downstream. The company successfully synthesized and delivered more than 420,000 new compounds to customers in the past 12 months, an increase of 6%; the biology business achieved revenue of 2.55 billion yuan, an increase of 3.1% year over year; 2) the back-end business contributed high growth, excluding specific commercial production projects, and D&M business revenue increased strongly by 55.1% year on year; TIDES business (mainly oligonucleotides and peptides) continued to expand. TIDES business revenue reached $3.41 billion in 2023, a strong year-on-year increase of 64.4%. By the end of 2023, TIDES's on-hand orders increased significantly by 226% year over year.
Big customers are more stable, and demand from the US is better. Looking at split customers, 1) in 2023, the company's revenue from US customers increased 42% year on year after excluding specific commercial production projects; revenue from European customers increased 12% year on year; revenue from Chinese customers increased 1% year on year; 2) revenue from the top 20 global pharmaceutical companies continued to grow rapidly to reach 16.11 billion yuan, up 44% year on year after excluding specific commercial production projects; revenue from other global customers maintained a growth trend of 18% year on year to 24.23 billion yuan.
Looking ahead to 2024, regular revenue is expected to maintain positive growth. Despite the uncertainty of the external environment, the company expects revenue to reach 383-40.5 billion in 2024, and will maintain positive growth after excluding COVID-19 commercialization projects (2.7-8.6%). After considering the rise in new production capacity and the impact of exchange rates, it is expected that 2024 will maintain an adjusted non-IFRS net interest rate similar to last year.
We predict that the company's net profit for 2024-2026 will be 9.152 billion yuan, 10.183 billion yuan, and 11,521 billion yuan, corresponding PE of 15/14/12 times, respectively, giving it a “buy” rating.
Risk warning
1. If the popularity of global pharmaceutical R&D falls short of expectations, it will affect the company's orders; 2. If overseas operating costs increase, it will affect the company's profit margin.