Announcement: Gloria Ying releases its 2023 annual report.
Comment:
The revenue side maintained a rapid growth trend. In 2023, the company's revenue was 7.825 billion yuan, excluding large orders, revenue of 5.405 billion yuan, an increase of 24.37% over the previous year. Net profit attributable to mother was 2,269 billion yuan, down 31.28% year on year; net profit not attributable to mother was 2.104 billion yuan, down 34.87% year on year. In the fourth quarter of 2023, the company's revenue was 1,442 billion yuan, down 40.99% year on year, and net profit to mother was 59 million yuan, down 89.89% year on year, after deducting non-net profit of 69 million yuan, down 87.47% year on year.
Operating conditions by business segment in 2023:
(1) Small molecule CDMO business: revenue of 6.620 billion yuan, revenue of 4.200 billion yuan after excluding large orders, an increase of 25.60% over the previous year. In 2023, the company confirmed revenue for 40 commercialization projects, achieving revenue of 5.112 billion yuan, and revenue of 2,692 billion yuan after excluding large orders, up 47.13% year on year; gross profit margin was 60.07%, up 9.53 percentage points year on year, and 7.46 percentage points year on year under constant exchange rate.
In 2023, the company confirmed revenue for 386 clinical-stage projects, an increase of 27 over the same period in 2022, including 69 clinical phase III projects, an increase of 7 over the same period in 2022. The confirmed revenue was 1,507 billion yuan, excluding the impact of specific anti-virus programs, which was basically the same year on year; the gross profit margin was 40.74%, down 0.54 percentage points year on year, and 3.50 percentage points year on year under a constant exchange rate.
(2) Emerging business: Relying on the competitive advantages accumulated in the small-molecule CDMO business field, the company promoted the rapid development of new businesses such as chemical macromolecules, clinical research services, formulations, biomacromolecule CDMO, technology export, and synthetic biotechnology. The emerging business sector achieved revenue of 1,199 billion yuan in 2023, an increase of 20.42% year-on-year and a gross profit margin of 26.48%, a year-on-year decrease of 7.20 percentage points.
Among them: (i) Chemical macromolecule business: 8.76% year-on-year increase. In 2023, a total of 74 new customers were developed, 80 new projects were undertaken, and a total of 33 projects were promoted to clinical phase II. Oligonucleotides undertook 35 new projects; vigorously promoted the development of the peptide business; undertook 12 new projects, and the first GLP-1 NDA project is being prepared; 33 new projects for toxin-conjugates, pharmaceutical polymers, polymer-drug conjugates and cationic lipids were undertaken in 2023, and 10 verification production projects are being carried out; the dedicated chemical macromolecule production workshop 1 has been successfully put into operation. As of the announcement date of March 29, 2024, the total solid phase synthesis production capacity is 10,250L, which is expected to reach 10,250L by the end of June 2024 14250L
(ii) Clinical research service business: a year-on-year decline of 7.44%. The company continues to thoroughly implement one-stop service, seamlessly connecting CMC, non-clinical and clinical medicine to help customers develop new drugs, jointly undertake 33 integrated service orders, and successfully obtain 5 implied licenses from the Chinese IND.
(iii) Formulation business: 18.36% year-on-year increase. 148 projects were successfully completed in 2023, and 156 ongoing formulation project orders.
(iv) Biomacromolecule CDMO business: 31.29% year-on-year increase. In 2023, the first dual-antibody ADC order was successfully delivered, and the first FDA IND project was successfully delivered to achieve overseas revenue. As of the announcement date of March 29, 2024, there are 71 active projects, including 16 IND projects, 18 ADC projects, 3 AOC projects, and 2 BLA projects. It is expected that orders for various conjugated drugs, including antibody-conjugated drugs, will continue to increase in the revenue share in the future.
(v) Synthetic biology business: A year-on-year increase of 38.13%. The first batch of production of the first IND project was successfully delivered. The enzyme evolution cycle has been shortened to a minimum of one week, multiple enzyme evolution orders have been successfully completed, and subsequent production orders have been received.
(vi) Continuous reaction business: 2023 was the first year for the company to export continuous reaction technology. Revenue exceeded 100 million yuan, and 19 new external technology export projects were undertaken, amounting to more than 250 million yuan, including 6 commercialization projects.
The company adheres to the business policy of continuously becoming a large customer, fully developing small and medium-sized customers, expanding the European and Japanese markets, controlling costs and improving efficiency. The company continues to increase the stickiness and depth of service, insists on “deepening” the service chain, and “expanding” small and medium-sized customers. In 2023, revenue from multinational pharmaceutical companies was 4.988 billion yuan, and revenue after excluding large orders was 2,868 billion yuan, an increase of 75.13% year on year. Under the continuing slump in the domestic and foreign biomedical financing environment, revenue from small and medium-sized pharmaceutical companies in 2023 was 2,837 billion yuan, a year-on-year decrease of 1.47%, of which overseas growth was 3.08%. The company accelerates global market expansion and continues to expand its service customer base, and has accumulated more than 1,100 active customers. In 2023, customer revenue from the US market was 5.267 billion yuan, excluding large orders of 2,847 billion yuan, up 47.47% year on year; revenue from domestic customers was 1,481 billion yuan, down 5.31% year on year; revenue from Asia Pacific (excluding mainland China) market increased 15.03% year on year; and customer revenue from European market increased 57.11% year on year.
Profit forecast. We expect EPS to be 3.59, 4.45, and 5.64 yuan respectively in 2024-2026. As a leader in internationalization in the industry, we think it is more reasonable to give 25-30 times PE in 24 years, with a corresponding reasonable value range of 89.66-107.60 yuan, maintaining the “superior to the market” rating.
Risk warning. The escalation of geopolitical risks between China and the US has limited overseas business, and the risk of business falling short of expectations; the risk of worsening industry competition; the risk of falling R&D costs for pharmaceutical companies; the risk of exchange rate fluctuations; loss of core technical personnel; and the risk that sales of innovative drugs by customers fall short of expectations.