Incidents:
On March 28, 2024, Gloria Ying released its 2023 Annual Report. The company achieved annual revenue of 7.825 billion yuan, down 23.70% year on year. After excluding large orders, revenue increased 24.37% year on year; net profit to mother was 2,269 billion yuan, down 31.28% year on year; net profit after deducting non-return to mother was 2.104 billion yuan, down 34.87% year on year. Looking at a single quarter, the company achieved revenue of 1,442 billion yuan in Q4 of 2023, a year-on-year decrease of 40.99%; net profit to mother was 59 million yuan, a year-on-year decrease of 89.89%; net profit after deducting non-return to mother was 69 million yuan, a year-on-year decrease of 87.47%.
Investment highlights:
The small-molecule CDMO routine business grew steadily, and clinical projects further enriched the small-molecule CDMO business with annual revenue of 6.620 billion yuan. After excluding large orders, the year-on-year growth rate reached 25.6%. (1) The number of commercialization stage projects reached 40, achieving revenue of 5.112 billion yuan, and revenue of 2,692 billion yuan after excluding large orders, an increase of 47.13% over the previous year. Benefiting from high-margin late-stage large order delivery and continuous cost reduction and efficiency, gross margin increased by 9.53 pts to 60.07%. (2) The revenue from the clinical phase was 1,507 billion yuan, excluding the impact of specific antiviral projects. Among them, 69 clinical phase III projects covered popular targets such as GLP-1, KRAS, JAK, TYK2, and CDK4/6, providing sufficient project reserves to obtain commercial orders for major drugs. The company expects to reach 28 PPQ projects in 2024, an increase of 40% over 2023, to ensure the long-term steady growth of the company's performance.
Emerging businesses are advancing at an accelerated pace, achieving breakthroughs in multiple fields. The revenue of emerging businesses in 2023 was 1,199 billion yuan, an increase of 20.42% over the previous year. (1) The annual revenue of chemical macromolecules increased by 8.76%, including 35 new oligonucleotide projects, 12 new peptide business projects, and preparation for the first GLP-1 NDA project. (2) The revenue of the pharmaceutical business increased by 18.36% in 2023, including overseas revenue increased by 20.51% and the number of orders increased by 50%. The company increased its customer development efforts, and the number of new customer orders accounted for 44%. (3) Biopharmaceutical CDMO revenue increased by 31.29%, with 71 active projects, including 16 IND projects, 18 ADC projects, 3 AOC projects, and 2 BLA projects. The company expects the share of conjugated drug orders to gradually increase in the future. (4) The first year of commercial export of continuous reaction technology was over 100 million, 19 new projects were added, the amount was over 250 million yuan, and 15 new in-depth cooperative customers were added.
Production capacity of the new business has been accelerated, and the 2024 performance can be expected. Chemical macromolecule production workshop 1 has been successfully put into operation. By the end of March, the total production capacity of polypeptide solid phase synthesis had reached 10,250 liters, and 2024H1 is expected to reach 14,250 liters to meet the commercial production needs of customers; in the biopharmaceutical CDMO sector, the Zhangjiang base has been officially opened, and the Jinshan base has completed expansion and passed the EU QP audit. The construction of the Fengxian commercial production base is progressing steadily; in the future, the company plans to obtain commercial chemical small molecules and chemical APIs through self-construction or acquisition in Europe. Chemical production capacity.
The profit forecast and investment rating take into account the phased decline in profitability after the delivery of large orders. We have lowered the profit forecast appropriately. We expect revenue for 2024/2025/2026 to be 6.402 billion yuan/7.766 billion yuan/9.430 billion yuan, corresponding to net profit of 1,311 billion yuan/1,636 billion yuan/2,056 billion yuan, and corresponding PE of 24/19/15x. We continue to be optimistic about the company's business development in the traditional small-molecule CDMO field and the strategic layout of new business segments, and maintain a “buy” rating.
Risks suggest that the competitive landscape has deteriorated; CDMO production capacity release falls short of expectations; CDMO order acceptance falls short of expectations; exchange rate fluctuations; and raw material prices fluctuate.