Incidents:
The company released its 2023 annual report. In 2023, it achieved revenue of 5,523 billion yuan, up 1.44% year on year; net profit to mother was 1,033 billion yuan, up 12.17% year on year; net profit after deducting non-return to mother was 1,024 billion yuan, up 10.46% year on year.
CDMO's business is growing steadily
In 2023, the company's CDMO business achieved revenue of 4,079 billion yuan, a year-on-year increase of 19.40%, gross margin of 40.34%, an increase of 0.65pp over the previous year. The company's CDMO project pipeline is becoming more and more rich. By the end of 2023, it had 32 commercialized projects, 74 clinical phase III projects, and 902 clinical phase I/II projects, which is expected to continue to drive steady revenue growth. The specialty APIs and intermediates business was slightly pressured by the supply and demand relationship in the industry. Revenue of 1,261 billion yuan was achieved in 2023, a year-on-year decrease of 22.95%.
Continued promotion of production capacity construction
The company continues to promote CDMO's global production capacity layout. In 2023, the main construction of the Ruibo Taizhou (Phase I) production workshop and supporting facilities was completed. Some production lines are expected to be put into operation in the second quarter of 2024; the API spray drying production workshop will be put into operation; the Ruibo Suzhou pilot plant will be put into operation one after another; and Ruibo America has carried out the second phase of the pilot plant installation and design work. In terms of specialty APIs, the company carries out green manufacturing, automation and intelligent improvement work, strengthens the application of enzyme catalysis and continuous technology, and rationally plans future production capacity improvement plans through analysis of existing product pipelines and future products.
Accelerate the layout of new businesses
The company continues to lay out new business segments. In 2023, the peptide team completed the synthesis and delivery of dozens of peptides and successfully delivered tens of million-grade polypeptide IND projects; the small nucleic acid team already has the business capability to undertake small nucleic acid customization, pharmaceutical research and toxicological batch production, and will continue to promote the construction of pilot platforms and GMP commercial workshops; the conjugation business has completed the preparation and delivery of multiple conjugated drug compounds. As high-activity laboratories and expanded production lines are built and put into use, the number of projects undertaken will continue to increase in the future.
Profit Forecasts, Valuations, and Ratings
Considering the current industry sentiment, we expect the company's revenue for 2024-2026 to be 62.99/72.84/7.466 billion yuan, respectively, with corresponding growth rates of 14.03%/15.65%/2.50%, respectively; net profit to mother will be 12.08/14.37/1,472 billion yuan, corresponding growth rates will be 16.92%/18.96%/2.42%, EPS 1.34/1.60/1.64, respectively, and 3-year CAGR of 12.52%. In view of the company's leading technical strength and rich project experience, referring to comparable company valuations, we gave the company 17 times PE in 2024, corresponding to a target price of 22.78 yuan, maintaining a “buy” rating.
Risk warning: geopolitical risks; increased industry competition; industry demand falls short of expectations; changes in drug approval policies; production capacity implementation falls short of expectations.