Baicheng Pharmaceutical Co., Ltd. announced that in 2023, the company achieved operating income of 1,017 million yuan, an increase of 67.51% over the same period of the previous year; net profit attributable to owners of the parent company was 272 million yuan, an increase of 40.07% over the same period last year. 2024Q1 achieved operating income of 216 million yuan, an increase of 34.04% over the same period of the previous year; net profit attributable to owners of the parent company was 50 million yuan, an increase of 42.06% over the same period last year.

Key points of investment

Ongoing orders are growing steadily, and the equity sharing business is expected to become an additional volume

In 2023, the company added 1,360 billion yuan of new orders, an increase of 35.06% over the previous year, and the current order amount was 1,586 billion yuan, an increase of 18.90% over the previous year.

The company's entrustment R&D services, R&D technology achievement transformation and equity sharing business achieved overall revenue of 953 million yuan, an increase of 65.16% over the previous year, and a gross profit margin of 67.36%. Among them, the independent R&D technology achievement transformation business converted 104 projects in 2023, achieving revenue of 392 million yuan, an increase of 77.66% over the previous year.

In order to maximize project value, the company is actively developing equity sharing business. In 2023, the company has 85 R&D projects with sales equity sharing, of which 13 have been approved. The company has set up nearly 300 independent R&D projects that have not yet been converted, and has a rich reserve of varieties to be converted.

Integrated service system helps CDMO's business flourish

By building our own integrated R&D and production platform, we are empowering customers by relying on hormonal and non-hormonal BFS production lines, and production lines for various special dosage forms of topical drugs such as ointments, gels, and transdermal patches. At present, Thermo Pharmaceuticals has built a GMP standard pharmaceutical plant and supporting laboratory of 136,000 square meters. The production dosage forms cover 24 dosage forms, including oral solid preparations, small-volume injections, oral liquids, ophthalmic preparations (eye drops), and inhaled preparations (containing hormones). In 2023, Thermo Pharmaceuticals achieved revenue of 193 million yuan, undertook more than 360 projects, and completed CDMO services for 280 commissioned R&D projects internally; of these, external customer orders achieved revenue of 52.4934 million yuan, an increase of 152.35% over the previous year.

Profit forecasting

Taking into account the boom in generic drugs in recent years, revenue for 2024 and 2025 was increased to 1,364 billion yuan or 1,819 billion yuan. The company's revenue for 2024-2026 is estimated to be 13.64 billion yuan, 18.19, and 2,373 billion yuan, respectively; net profit due to mother is 3.61, 4.78, and 619 million yuan, respectively; EPS is 3.32, 4.39, and 5.68 yuan respectively. The current stock price corresponds to PE of 20.8, 15.7, and 12.1 times, respectively, maintaining a “buy” investment rating.

Risk warning

Risks such as policy changes, increased competition in the generic drug CRO industry, risk that order conversion falls short of expectations, and CDMO business development falls short of expectations.