Incident: On April 24, 2024, Chengdu Pioneer released its 2023 annual report. The company achieved annual revenue of 371 million yuan, up 12.64% year on year; net profit to mother was 407.18,500 yuan, up 61.16% year on year; after deducting non-net profit of 3.4519 million yuan, a year-on-year decrease of 72.38%. In 2024, Q1 achieved revenue of 107 million yuan, a year-on-year increase of 54.35%. Net profit to mother was 13.94 million yuan, after deducting non-net profit of 8.1942 million yuan. Performance growth was in line with expectations.
DEL screening and library customization services have resumed significantly, and continue to enhance novelty and service diversification. The DEL sector achieved revenue of 184 million yuan in 2023, an increase of 25.45% year over year, and 24Q1 revenue increased 49.33% year over year.
In terms of DEL screening, the company screened 53 target types and hundreds of targets. The project screening success rate reached 76%, the average time period was shortened to less than 3 months, achieved compound IP transfers for 21 projects, and launched “DEL For” and “DEL Plus” to expand the scope of application of DEL technology. In terms of library customization, the number of DEL library molecules has exceeded 1.2 trillion, and more than 6,000 types of frameworks have been added; in order to meet the needs of customers for miniaturization and autonomy, the company has newly upgraded OpenDelTM products, with about 3 billion molecules, providing customers with high-quality and complete screening data packages, providing a good data foundation for AI/ML.
Diversified technology platforms are gradually showing commercial value and strengthening the company's ability to discover and optimize new drugs. In 2023, FBDD/SBDD revenue was 917.783 million yuan, down 11.13% year on year, and 24Q1 revenue growth rate was 78.83%, mainly due to Vernalis receiving project milestone revenue; the STO sector's revenue in 2023 was 34.3778 million yuan, a year-on-year decrease of 10.62%, and revenue increased strongly by 60.16% after excluding new nucleic acid drug transfer projects; TPD (targeted protein degradation), BioSer (biological services), and ChemSer (chemical services) revenue was 1852.20, respectively. At 158.759 billion yuan and 157.979 billion yuan, an increase of 111.85%, 544.41%, and 231.43% over the previous year, the commercial transformation of various new technology platforms contributed one after another to revenue.
R&D investment focuses on platform upgrades and iterations and key pipelines, and AI accelerates the efficiency of drug development. In 2023, R&D investment was 796.08,000 yuan, a year-on-year decrease of 8.87%. The capacity building of the core technology platform has been gradually improved. In the self-developed new drug pipeline, 3 projects are in clinical phase I, 2 projects are in IND reporting, and 2 projects are in the PCC stage. The future business focus will shift somewhat towards commercialization projects. Furthermore, the company is actively promoting DEL+AI capacity building, using massive amounts of real and high-quality experimental data to train AI models, further expand the explorable compound space and speed up the compound optimization process, and build a high-throughput chemical synthesis and compound detection platform to accelerate PCC discovery and optimization through an iterative “design-synthesis-testing-analysis” cycle.
Investment advice: Chengdu Pioneer focuses on new drug discovery and optimization services driven by DEL technology, and the core technology platform is gradually accelerating commercial transformation. We expect the company's revenue in 2024-2026 to be 433/5.03/584 million yuan, up 16.6%/16.2%/16.1% year-on-year, and net profit to mother of 0.52/0.63 billion yuan, respectively, corresponding PE 97/80/67 times, maintaining the “recommended” rating.
Risk warning: risk of R&D failure, drug discovery technology substitution risk, management risk, customer concentration risk, exchange rate risk.