Introduction to this report:
New orders have improved, performance is expected to recover quarterly, and the integrated transformation logic continues to be implemented. We are optimistic about the company's long-term growth and maintain an increase in holdings rating.
Key points of investment:
Maintain an “Overweight” rating. 2024Q1's revenue was 2.671 billion yuan (-1.95%), net profit due to mother was 231 million yuan (-33.80%), and adjusted net profit of 339 million yuan (-22.7%). The year-on-year decline on the profit side was mainly due to one-time losses due to the consolidation and closure of laboratories in Shanghai, increased employee costs, a decrease in the fair value of biological assets, and an increase in financial expenses. The results were in line with expectations. Maintain the 2024-2026 EPS forecast of 0.98/1.13/1.35 yuan, maintain the target price of 27.44 yuan, and maintain the increase in holdings rating.
The growth rate of new orders has improved, and performance is expected to improve quarter by quarter. 2024Q1 new orders increased 20% + year over year, including: laboratory service revenue of 1.605 billion yuan (-2.9%), gross profit margin of 44.14% (-0.34pct), new order growth rate 10% +; small molecule CDMO business revenue of 582 million yuan (-2.7%), mainly affected by the pace of project delivery, gross profit margin 27.90% (-5.05pct), new order growth rate 40% +, significant improvement; clinical research service revenue of 392 million yuan (+4.6%), mainly overseas clinical services & SMO Due to contributions, gross profit margin was 9.32% (-4.7pct); macromolecule, cell and gene therapy revenue was 0.91 million yuan (-4.15%), and gross profit margin was -38.60%. The profitability of the CMC, clinical and CGT businesses declined year-on-year. Projects are expected to be delivered quarterly, and profitability is expected to improve as capacity utilization climbs.
The number of customers and projects has been steadily expanding. The company's customer structure continues to be optimized. In 2023, revenue from the world's top 20 pharmaceutical companies increased by 14.9%, European customers accelerated development, accounting for 16% of revenue, and the revenue growth rate exceeded 24.4%. More than 800 new customers and 2,800 active customers. There are 885 CMC service projects, including 29 process validation and commercialization projects (+265) and 27 clinical phase III projects (+3). The Ningbo formulation workshop successfully completed on-site inspections and GMP compliance checks, and back-end capabilities are expected to be gradually realized.
Catalysts: Investment and financing improved, back-end business development exceeded expectations, and business operation efficiency improved.
Risk warning: geopolitical risk, investment and financing data fluctuation risk, exchange rate fluctuation risk.