Key points of investment:
Maintain an “Overweight” rating. The company released its 2023 annual report, and the results fell slightly short of expectations. Considering the continued decline in the share of COVID-19 projects, the 24-25 EPS was lowered to 2.58/2.99 yuan (originally 3.04/3.83 yuan), and the 26-year EPS forecast was added by 3.39 yuan. Referring to the industry average, considering that the company has a certain premium as the CRO leader, the 2024 PE 26X was given, and the target price was lowered to 67.08 yuan to maintain the “gain” rating.
Revenue grew steadily throughout the year, and profits were disrupted by multiple factors. Revenue of $7.384 billion (+4.21%) for 23 years, by sector: ① Revenue from the clinical trial technology service business was 4.168 billion yuan (+1.04%), mainly due to a decrease in clinical trials of specific vaccine projects, which saw an increase in revenue after excluding such projects; ② Revenue from clinical trial-related services and laboratory services of 3.121 billion yuan (+8.51%), mainly due to increased revenue from field management and patient recruitment, data management and statistical analysis, and laboratory services. Net profit attributable to mother was RMB 2,025 million (+0.91%), after deducting non-net profit of RMB 1,540 million (-4.05%). The growth rate was higher than that of net income after deduction, mainly due to: ① investment income of RMB 338 million, mainly from equity transfer; ② net income of fair value of RMB 353 million. The deduction of non-net profit is more indicative of the company's actual business conditions. The main expected decline in revenue from specific vaccine projects is: ① a sharp year-on-year decline in revenue for specific vaccine projects; ② significant fluctuations in the biomedical external financing environment; ③ gross margin of clinical trial-related services and laboratory services - 3.6 pct, mainly due to environmental impact in 23H2 hospitals, changes in revenue structure, and high investment costs for new production capacity. With the improvement of these three factors, the 24-year results are expected to pick up.
Fresh orders continue to increase, and overseas business is expanding in an orderly manner. Fresh orders continued to increase in 23 years, and new orders from multinational pharmaceutical companies continued to grow. At the end of 23, the total contract amount to be executed was 14.08 billion yuan (+2.1%), 752 clinical projects were underway (680 at the end of '22), the number of overseas single-center clinical trials was 194 (188 at the end of '22), and continued to build teams and actively cooperate with local institutions in the US, Europe, Southeast Asia, etc. It is expected that in the context of continued development of global business, overseas sales will increase.
Catalysts: Continued progress in domestic clinical trials, continuous expansion of overseas business, continuous increase in fresh orders Risk warning: clinical project progress falls short of expectations, risk of overseas policy risk, risk of investment income fluctuations