Core views:
Emerging businesses are gradually gaining strength, and small-molecule CDMO business acceleration advantages. According to the company's annual report, the company achieved operating income of 7.825 billion yuan in 2023, with revenue of 5.405 billion yuan after excluding large orders, up 24.37% year on year; gross margin in 2023 was 51.16%, up 3.79 percentage points year on year, and 1.64 percentage points year on year under constant exchange rate. Among them, the small-molecule business achieved revenue of 6.620 billion yuan, with revenue of 4.200 billion yuan after excluding large orders, an increase of 25.60% over the previous year; the emerging services business achieved revenue of 1,199 billion yuan, an increase of 20.42% over the previous year.
The small molecule CDMO business penetration rate continues to increase, and commercialization projects continue to grow. According to the company's annual report, the company's 40 commercialization projects confirmed revenue in 2023, 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; the gross profit margin was 60.07%, an increase of 7.46 percentage points year-on-year at a constant exchange rate. Currently, there are 386 clinical phase projects and 69 phase 3 clinical projects, which guarantee subsequent performance growth.
Emerging businesses accelerate talent capacity building and promote new capacity building for new molecules. According to the company's annual report, the company will continue to promote new businesses such as chemical macromolecules, clinical research services, formulations, biomacromolecule CDMO, technology export, and synthetic biotechnology in 2023. Rapidly develop technical platforms for various business segments of chemical macromolecules, including oligonucleotide liquid phase to enzyme connection technology, peptide solid phase - liquid phase - enzyme connection technology, etc.; 156 ongoing project orders in the formulation business; 71 ongoing projects in the field of macromolecular CDMO. Emerging businesses continue to gain strength.
Profit forecasting and investment advice. Based on the company's orders and production capacity, the company's net profit for 24-26 is estimated to be 1,299/16.00/2,040 billion yuan, and EPS is 3.52/4.33/5.52 yuan/share, respectively, and the corresponding PE is 21.96/17.82/13.98 times, respectively. Referring to comparable companies in the industry, the company was given a PE valuation of 25 times in 24 years, corresponding to a reasonable value of 87.91 yuan/share for A shares, giving it a “buy” rating. For H shares, with reference to the AH premium, the reasonable value of the corresponding company's H shares remained unchanged at HK$69.12/share, maintaining the “buy” rating.
Risk warning. Order completion falls short of expectations, a slowdown in the number of new projects, geopolitical risks, etc.