Incident: The company released its 2023 annual report. In 2023, the company achieved revenue of 7.83 billion yuan, a year-on-year decrease of 23.7%; realized net profit of 2.27 billion yuan, a year-on-year decrease of 31.3%; and realized deducted non-net profit of 2.1 billion yuan, a year-on-year decrease of 34.9%.
Regular business continued to grow after excluding large orders, and clinical projects continued to increase. The small-molecule CDMO business achieved revenue of 6.62 billion yuan in 2023 (revenue of 4.2 billion yuan after excluding large orders, +25.6%). 1) Commercialization phase projects: Achieved revenue of 5.11 billion yuan (revenue of 2.69 billion yuan after excluding large orders, +47.1%). Benefiting from high-margin commercial order delivery and continued cost reduction and efficiency, gross margin increased to 60.1% (+9.5pp). 2) Clinical-stage projects: Achieved revenue of 1.51 billion yuan (-9.6%, which was basically the same as the previous year after excluding the impact of specific antiviral programs), including 69 clinical phase III projects, covering popular targets such as GLP-1, KRAS, JAK, TYK2, and CDK4/6, providing sufficient project reserves for continuing to obtain commercial orders for major drugs. The company expects 28 PPQ projects (+40%) in 2024, creating sufficient commercial order reserves.
Accelerate the deployment of emerging businesses and achieve technological breakthroughs in various fields. The emerging business had revenue of 1.2 billion yuan (+20.4%) in 2023, and gross margin of 26.5% (-7.2pp). By business, 1) Chemical macromolecule business: Annual revenue increased by 8.8%, and a total of 33 projects advanced to post-clinical phase II; including 35 new oligonucleotide projects, 12 new peptide business projects, and the first GLP-1 NDA project progressed steadily. 2) Formulation business: Revenue increased 18.4% in '23, including overseas revenue increased by 20.5% and overseas orders increased by 50%; successfully completed 148 projects, and 156 ongoing pharmaceutical project orders in 2023. 3) Clinical CRO business: As of 2023, the company has 356 ongoing clinical research projects, including 123 phase II and later projects; undertook 347 new projects, including 44 new projects in the CGT field and 33 integrated service orders; 4) Biopharmaceutical CDMO business: revenue increased by 31.3%, 71 active projects, including 16 IND projects, 18 ADC projects, 3 RDC projects, and 2 BLA projects. It is expected that the share of orders for various conjugated drugs will continue to increase in the future; 5) New Technology export business: Achieved revenue of 110 million yuan, contract amount exceeded 250 million yuan, undertook 19 new foreign technology export projects, including 6 commercialization projects. Continuous Response Technology exported to foreign countries with commercial revenue of over 100 million yuan in the first year. By the end of 2023, the company had active orders of US$884 million, and non-COVID-19 revenue is expected to grow by 15%-25% in 2024.
Profit forecasting and investment advice. We expect EPS to be 3.76 yuan, 4.59 yuan, and 5.74 yuan respectively in 2024-2026, corresponding PE will be 23 times, 19 times, and 15 times, respectively, maintaining the “buy” rating.
Risk warning: Risks such as a decline or fluctuation in the number of orders, falling short of expectations in production capacity, falling short of expectations in business development, and fluctuations in fair value.