其中净利润拆分：①实验室服务净利润为4.73 亿，YOY- 17.90%，净利率20%，YOY -5pcts，②资金管理收益为1.31 亿元；③生物资产公允价值变动带来净损失为2.67 亿。Key points of investment
Performance: Steady increase in revenue, slight decline in profitability
2023: Revenue of 2.376 billion, YOY 4.78%, net profit to mother of 397 million, YOY -63.04%, gross profit margin of main business 42.62%, YOY- 5.28 pcts.
Among them, net profit split: ① Net profit from laboratory services was 473 million, YOY- 17.90%, net interest rate 20%, YOY -5pcts, ② fund management revenue was 131 million yuan; ③ net loss due to changes in fair value of biological assets was 267 million yuan.
2023Q4: Revenue of 789 million yuan, YOY - 20.39%, net profit to mother of 69 million yuan, YOY -84.31%, gross profit margin of 40.3%, YOY - 5.27 pcts.
Growth capacity: High growth overseas, waiting for domestic economic recovery
By business, drug non-clinical research services are still the absolute main body of the company's revenue, with revenue of 2.309 billion yuan in 2023, YOY +4.31%, accounting for 97% of total revenue, 43.22% gross profit margin, and YOY -5.09pcts. We believe this is mainly related to the fact that the industry sentiment in 2023 fell short of expectations and the company adjusted its market expansion strategy in a timely manner. At the same time, changes in the fair value of biological assets in 2023 also led to changes in the total order price, which in turn affected revenue growth.
By region, 23 years, domestic 1.798 billion, YOY -4.64%, gross profit margin 43.62%, YOY-4.99pcts, overseas 589 million, YOY 51.20%, gross profit margin 39.49%, YOY-4.89pcts. Overseas is the main support for growth.
Order perspective: By the end of '23, the company had ongoing orders of about 3.3 billion yuan and new orders of 2.3 billion yuan. The amount of new orders in Q4 remained flat month-on-month, but the number of projects continued to recover. Overseas subsidiaries signed new orders of about 340 million yuan in 2023.
Production capacity perspective: The Suzhou Zhaoyan Phase II 2w square meter facility has been capped, and the 2.2 w square meter supporting facility in Suzhou is expected to be gradually put into use in 2024. The subsidiary Zhaoyan Yichuang Non-GLP Laboratory, which focuses on the screening of new drugs, has been put into use. From the perspective of overseas production capacity, the main bottleneck in the current development of the company BIOMERE is production capacity restrictions. The company is expected to support BIOMERE expansion in 24 years in a variety of ways to increase service throughput in the US.
24-year forecast: We believe that considering the amount of orders in progress, the order execution cycle, the current supply and demand pattern of biological assets, the domestic investment and financing environment, and overseas production capacity bottlenecks, we believe that the company's revenue side will still be under some pressure in 24, but subsequent growth and order growth are expected to be effectively improved as the innovative drug market recovers.
Profitability: The downward trend may continue until 2024
Gross profit margin: 23Q4 gross profit margin of 40.3%, YOY- 5.27 pcts. We expect it is mainly related to the adjusted market expansion strategy mentioned in the company's annual report. Considering that there are no significant changes in industry trends and the impact of the order cycle, the decline in gross margin may continue until 2024.
Expenses: Apart from a sharp drop in management expenses in 2023Q4, the company's R&D and sales expenses were basically flat from month to month.
We predict that in order to withstand the decline in industry sentiment, the company will continue to develop customers and regions in 24, and the absolute value of management/development/sales expenses may increase slightly from month to month.
Profit forecasting and valuation
Considering the overall boom in the industry, order execution cycle, and changes in the company's market expansion strategy, we predict that the company's gross margin will still decline to a certain extent in 2024. We forecast EPS of 0.37, 0.45, 0.71 yuan/share for 2024-2026. Refer to the closing price on April 2, 2024, corresponding to 50 times PE in 2024. Maintain an “gain” rating based on comparable company valuations and industry positions.
Risk warning
The volatility of the impact of depreciation of new fixed assets, equity incentives, and exchange on apparent performance; volatility in the profit cycle of new businesses; and a decline in the investment and financing boom in innovative pharmaceuticals.
