Maintain an increase in holdings rating. Revenue of $1,725 million (+8.18%) in 2023, net profit to mother of $197 million (-37.19%); 2024Q1 revenue of $377 million (-1.56%), net profit to mother of 49 million yuan (-14.32%), in line with expectations. Considering the impact of the investment and financing environment and market competition, the 2024-2025 EPS forecast was lowered to 1.22/1.61 yuan (originally 1.41/1.75 yuan), and the 2026 EPS forecast was added to 2.01 yuan. Referring to comparable company valuations, a significant valuation premium was given, the 2024 PE30X was given, and the target price was lowered to 36.6 yuan (originally 56.40 yuan) to maintain the increase rating.
Profitability is under pressure in the short term and is expected to improve in 2024. The 2023/2024Q1 pharmaceutical research phase revenue was $345 million (+12.13%) and $85 million (+5.45%), respectively, while revenue from the drug development and commercialization phase was $1,380 million (+7.24%) and $292 million (-3.45%), respectively.
The gross profit margin in 2023 was 42.52% (-2.96pct) and the net interest rate was 11.44% (-9pct) due to competition on the product price side and labor costs, capacity depreciation, and interest expenses on convertible bonds. Under human efficiency optimization and cost-side control, the 2024Q1 net interest rate increased to 13.11%, which is a significant improvement over the previous month.
The number of projects and customers is steadily expanding, and the back-end business is expected to gradually materialize. In 2023, there were 744 active customers (+8.77%), with active customer revenue of 1,659 billion yuan (+13.24%): of which the number of customers with large orders of 5 million or more reached 75 (+25%), and revenue of 1,364 billion yuan (+9.71%); continuing to promote the two-way drainage pattern of molecular blocks, drug discovery, and CDMO. The project pipeline progressed, with 2,200 pre-clinical to phase II projects and 62 phase III to commercialization projects.
Catalyst: Order expansion exceeded expectations, terminal demand improved
Risk warning: industry competition increases risk, exchange rate fluctuation risk, geopolitical risk