Event: On April 8, 2024, Jiuzhou Pharmaceutical released its 2023 annual report. The company achieved annual revenue of 5,523 billion yuan, up 1.44% year on year; net profit to mother of 1,033 billion yuan, up 12.17% year on year; deducted non-net profit of 1,024 billion yuan, up 10.46% year on year. Looking at a single quarter, Q4 achieved revenue of 947 million yuan, a year-on-year decrease of 11.71%; net profit to mother was 66 million yuan, a year-on-year decrease of 62.58%; after deducting non-net profit of 73 million yuan, a year-on-year decrease of 55.75%.
The CDMO business for APIs and formulations expanded rapidly, and revenue from commercialization stage projects increased steadily. In 2023, CDMO achieved revenue of 4,079 billion yuan, a year-on-year increase of 19.40%, and a gross profit margin of 40.34% (+0.65pts); revenue from specialty APIs and intermediates was 1,261 billion yuan, a year-on-year decrease of 22.95%, mainly affected by price fluctuations of individual varieties. The number of the company's CDMO projects has been growing steadily. By the end of 2023, it had undertaken 32 commercialization projects (+6), 74 phase III clinical projects (+13), 902 phase I/II clinical trial projects (+138), and the number of new drug projects submitted for NDA increased rapidly. Relying on Ruihua's Zhongshan factory, Siwei Pharmaceutical and Kang Chuanji Pharmaceutical, the company has established a formulation CDMO service system integrating R&D, production and registration, providing services for more than 70 formulation projects for more than 40 customers, introducing more than 20 new customers, and achieving rapid development in the formulation business. In addition, the company has accelerated the development of an integrated industrial chain for APIs and formulations. By the end of 2023, it had 17 formulation pipeline projects, of which 3 projects have been approved and 6 projects have been submitted for listing.
Featured platforms for peptides, conjugated drugs, and small nucleic acids were laid out, and multiple project delivery tasks were successfully completed. The company has established a one-stop capacity to produce peptides with customized peptides, registration and regulatory conditions. The peptide GMP production line was put into use in Q1 2023, and has successfully delivered the 10 million grade polypeptide IND project; in terms of conjugation drug platforms, the company has R&D and production capabilities for various conjugated drugs such as ADC, PDC, SMDC, etc., and the OEB4 grade, OEB5 high-activity laboratory and GMP high-activity workshop can provide customers with single-batch production services from milligrams to hundreds of grams. The small nucleic acid team can undertake small nucleic acid customization, pharmaceutical research and toxicological batch production, and accelerate the construction of small nucleic acid pilot platforms and GMP commercial workshops.
Comprehensively increase advanced production capacity for APIs, CDMOs, peptides and formulations, and continue to strengthen global business acceptance capabilities. (1) The Ruibo Taizhou (Phase 1) production workshop has entered the equipment installation stage, and some production lines are expected to be put into use in Q2 in 2024; (2) Ruibo's Suzhou pilot plant will be put into operation one after another and can undertake API and peptide projects; (3) build new production capacity for anti-tumor preparations and softgels to improve the one-stop CDMO capacity for APIs and formulations; (4) Invest in the construction of a Japanese CRO service platform. Ruibo USA carried out the second phase of installation and design work for the pilot plant, and established Ruibo Singapore as an overseas management headquarters to improve the ability to undertake global projects.
Investment advice: Jiuzhou Pharmaceutical is the world's leading CDMO company and continues to improve its core technology platform.
We expect the company's revenue in 2024-2026 to be 63.23/72.92/8.468 billion yuan respectively, up 14.5%/15.3%/16.1% year-on-year, and net profit to mother of 11.96/13.86/16.16 billion yuan respectively, corresponding PE is 13/11/9 times, maintaining the “recommended” rating.
Risk warning: R&D failure risk, management risk, industry policy risk, production safety risk, exchange rate risk, etc.