The company released its 2023 annual report: In 2023, it achieved revenue of 7.4 billion yuan (yoy +4.2%), gross profit margin of 38.18% (yoy-1.15pct), net profit of 2 billion yuan (yoy +0.9%), net profit of 1.5 billion yuan (yoy -4.1%) after deducting non-IFRS net profit of 1.8 billion yuan (yoy +7.2%). Among them, Q4 achieved revenue of 1.7 billion yuan (yoy +3.2%), net profit of 150 million yuan (yoy -63.9%), and net profit of non-return to mother of 280 million yuan (yoy -19.7%).
Pending orders continued to grow, and the new order structure was optimized: by the end of 2023, the company had accumulated 14.08 billion yuan of pending execution contracts (yoy +2.1%); net new orders of 7.85 billion yuan (yoy -18.8%) in 2023. The main reasons include: 1) cancellation of orders by some 2023Q4 customers and contract changes with negative amounts; 2) a sharp year-on-year decrease in handling fees for new orders.
The global layout and service capabilities continue to deepen: 1) The international headquarters was established in Hong Kong, China in 2023 to become the center of the company's overseas function management and business development; 2) New MNC orders continued to grow, especially in the fields of real-world research, SMO, and pharmacovigilance; 3) Overseas BD progressed, and new orders and business in the North American market all achieved rapid growth.
Clinical trial technology service business: Achieved revenue of 4.2 billion yuan (yoy +1.04%) in 2023, excluding clinical trial projects for specific vaccine projects, and sector revenue growth. By the end of 2023, there were 752 ongoing drug clinical research projects (+72 compared to the end of 2022), including 330 Phase I (+45 compared to the end of 2022), 136 Phase II (+2 compared to the end of 2022), 171 Phase III (+11 compared to the end of 2022), and 31 Phase IV (-3 compared to the end of 2022). Gross margin increased by 0.58pct to 38.21% in 2023. The main reasons include: 1) the gradual normalization of business from 2023Q2, the year-on-year increase in work efficiency, and 2) the reduction in handling costs associated with specific vaccine projects.
Clinical trial-related services and laboratory services business: Achieved revenue of 3.1 billion yuan (yoy +8.51%) in 2023, mainly benefiting from increased revenue from SMO, digital systems, and laboratory services. The gross profit margin in 2023 is 38.16% (yoy-3.60pct). The main reasons include: 1) Fangda Holdings' revenue growth is slowing down, especially in the early drug discovery and CMC phase, while Fangda's newly established bases are starting operations and related costs are increasing; 2) changes in revenue structure.
Maintain an “overweight” investment rating. Continued optimism about the company's leading position in the domestic clinical CRO industry is expected to continue to increase its market share and profitability through international layout and business development. Considering the uncertainty of the macro environment and bioinvestment and financing environment, we expect the company's net profit to mother in 2024-2026 to be 22/25/30 billion yuan, respectively, corresponding to PE 21/18/15 times.
Risk warning: risks such as exchange rate fluctuations, risk of R&D failure, and increased market competition.