The company released its 2023 annual report: In 2023, it achieved operating income of 7.825 billion yuan (yoy -23.7%), achieved revenue of 5.405 billion yuan (yoy +24.4%) after excluding large orders, a gross profit margin of 51.16% (yoy+3.79pct), realized net profit of 2,269 billion yuan (yoy -31.3%), and realized net profit of 2,104 billion yuan (yoy +29.4%) after excluding large orders. Among them, Q4 achieved revenue of 1,442 billion yuan (yoy -41.0%) in a single quarter, realized net profit of 58.7 million yuan (yoy -89.9%), and realized net profit deducted from non-mother of 68.57 million yuan (yoy -87.5%).
Continue to take advantage of technology-driven advantages to steadily improve the quality of the small-molecule CDMO business. The small-molecule CDMO business achieved revenue of 6.62 billion yuan (yoy -28.5%), achieved revenue of 4.200 billion yuan (yoy +25.6%) after excluding large orders, and a gross profit margin of 55.7% (yoy+0.07pct).
Commercialization stage: Revenue of 5.112 billion yuan (yoy -32.6%) was achieved in 2023, revenue of 2,692 billion yuan (yoy +47.1%) after excluding large orders; gross profit margin of 60.1% (yoy+9.50pct). The main reasons include: 1) higher gross margin for late delivery of large orders, 2) exchange rate factors, and 3) internal cost reduction and efficiency.
Clinical stage: Revenue of 1,507 billion yuan (yoy -9.6%) and gross profit margin of 40.7% (yoy-0.54pct) in 2023. The main reason is intense competition in the domestic market and the gross margin is relatively low. 1) Projects: Even in the face of fluctuations in the global investment and financing environment, the number of clinical-stage projects with confirmed revenue in 2023 reached 386, an increase of 27 over the same period in 2022; 2) Reserve potential major projects: The clinical phase III projects served by the company involve popular targets or promising new targets such as GLP-1, KRAS, and JAK, providing sufficient project reserves to continue to obtain commercial orders for major drugs; 3) Potential commercialization orders: PPQ projects are expected to reach 28 (yoy +40%) in 2024 based on ongoing orders.
Emerging businesses continue to advance steadily, and many breakthroughs have been achieved. Revenue of 1,199 billion yuan (yoy +20.4%) and gross profit margin of 26.5% (yoy-7.2pct) in 2023 was mainly affected by fluctuations in the domestic investment and financing environment.
Chemical macromolecule CDMO: revenue yoy +8.8%. 1) Number of projects: A total of 33 projects advanced to clinical phase II in 2023, 35 new oligonucleotide production projects completed, 1 verification production project completed, 1 verification production project in progress, 12 new peptide projects, and the first GLP-1 NDA project progressed steadily; 2) Production capacity: Production capacity: Production workshop 1 dedicated to chemical macromolecules was successfully put into operation, with 10 oligonucleotide pilot-commercial production lines, with a synthesis capacity of 500 kg/year. In terms of peptide production capacity, the total production capacity of solid phase synthesis is currently estimated to be 10,250 to 10,250 L It reached 14,250L at the end of June 2024.
Clinical CRO Services: Revenue yoy -7.4%. In 2023, the company undertook 347 new projects, including 44 CGT projects; 33 integrated service orders, and added 14 overseas declaration orders.
Formulation CDMO service: revenue yoy +18.4%, of which overseas revenue yoy +20.5%. In 2023, 148 projects were successfully completed, 156 ongoing formulation project orders were successfully completed, and the number of signed orders in 2023 was +50%.
Biomacromolecular CDMO: revenue yoy +31.3%. The first dual antibody ADC order was delivered in 2023, the first FDA IND project was delivered, and overseas revenue was achieved; by the end of 2023, the company had 71 active projects, including 18 ADC projects and 3 RDC projects. According to the types of orders in progress, it is expected that the share of various conjugated drug orders in future revenue will continue to increase; in addition, a breakthrough in integrated services was obtained, and the first BLA order for the integrated service ADC project was obtained in 2023.
Synthetic biotechnology: revenue yoy +38.1%. In 2023, we reached 70+ new customers, and the first batch of production for the first IND project has been successfully delivered.
Export of new technology to foreign countries: 2023 is the beginning of the continuous reaction technology export business. It confirmed that revenue exceeded 100 million yuan, and 19 new foreign technology export projects were undertaken, amounting to more than 250 million yuan, including 6 commercialization projects.
2024 outlook: The company expects a 15% to 25% year-on-year increase in non-COVID-19 revenue in 2024; in addition, the company will accelerate overseas production capacity construction, especially from small-molecule API testing to commercialization.
Maintain an “overweight” investment rating. The company adheres to technology-driven development, thoroughly implements the “two-wheel drive” development strategy, consolidates service capabilities in the field of small-molecule CDMO, and actively expands into emerging business fields. The global investment and financing environment has picked up. Considering that investment and financing transmission and driving changes in pharmaceutical companies' customer behavior still requires a certain period of time, we expect net profit to be 13.6/15.8/1.86 billion yuan in 2024-2026, respectively, and the corresponding PE is 23/20/17x, respectively. Maintain an “overweight” investment rating.
Risk warning: risks such as geopolitics, changes in industry regulations, slowing downstream demand, and falling short of expectations in new business development.