Incident Overview
The company announced its 2024 quarterly report: 24Q1 achieved operating income of 2,671 billion yuan, a year-on-year decrease of 1.95%, and realized net profit of 231 million yuan, a year-on-year decrease of 33.80%, realized deducted non-net profit of 187 million yuan, a year-on-year decrease of 46.01%. The adjusted net profit attributable to shareholders of listed companies not under IFRS was 339 million yuan, a year-on-year decrease of 22.70%.
Analytical judgment:
Performance is under pressure, and the signing of new orders ushered in a trend improvement
The company achieved operating income of 2,671 billion yuan in 24Q1, down 1.95% year on year. Due to the decline in global sentiment, revenue was basically in line with market expectations; the company's 24Q1 adjusted net profit was 339 million yuan, down 22.70% year on year. The main influencing factors were the decline in gross margin of CMC business, clinical business, and new business, as well as an increase in interest expenses due to an increase in long-term loans, etc. According to the company's 2024 quarterly report and its official website communication PPT, the company's 24Q1 global customer inquiries and visits picked up year-on-year, with new orders increasing by more than 20% year over year. Among them, new orders for the laboratory business increased 10% + year over year and new orders for the CMC business increased 40% + year over year. Looking forward to the future, maintaining expectations for 24 years, that is, the revenue side maintained 10% + growth.
(1) Laboratory services are affected by the decline in global sentiment, and overall gross margin performance is relatively stable. 24Q1 laboratory services achieved revenue of 1,605 billion yuan, a year-on-year decrease of 2.92%, gross margin of 44.14%, a year-on-year decrease of 0.34 pct. Revenue was mainly affected by the decline in global sentiment;
(2) The CMC business is expected to contribute to performance flexibility in the future: the 24Q1 CMC business achieved revenue of 582 million yuan, a year-on-year decrease of 2.7%, and its gross margin was 27.9%, a year-on-year decrease of 5.0 pct, mainly due to factors such as the shift in new production capacity in Shaoxing. CMC business Q1 new orders increased by more than 40% year over year, and performance is expected to gradually improve in the next few quarters.
(3) The clinical business was affected by increased domestic competition, and gross margin decreased: 24Q1 clinical business achieved revenue of 392 million yuan, up 4.6% year on year, and its gross margin was 9.3%, down 4.7% year on year. We judge that the gross margin situation was mainly affected by increased domestic competition.
(4) The macromolecule and cell and gene therapy business is under pressure: The 24Q1 macromolecule and CGTCDMO business achieved revenue of 91 million yuan, a year-on-year decrease of 4.1%. Its gross margin was -38.6%, and the overall pressure continued.
Investment advice
As an integrated CXO service provider with a global layout, the company looks forward to the future, which is expected to be accompanied by an improvement in global prosperity and an upward trend in performance growth. Considering that global sentiment is expected to gradually recover in 24, revenue for 24-26 is estimated to be 127.44/146.77/16.920 billion yuan, and EPS is 0.92/1.09/1.27 yuan, corresponding to the closing price of 19.16 yuan/share on April 26, 2024. PE is 21/18/15 times, respectively, maintaining the “gain” rating.
Risk warning
Risk of failure in developing new products, risk of uncertainty in industry demand, risk of loss of core technical personnel, risk of exchange rate fluctuations.