Event: On April 25, 2024, Sunshine Nuohe released its 2023 annual report. The company achieved annual revenue of 932 million yuan, up 37.76% year on year; net profit to mother was 185 million yuan, up 18.08% year on year; net profit after deducting non-return to mother was 180 million yuan, up 26.67% year on year. In 2024, Q1 achieved revenue of 255 million yuan, an increase of 8.53% year on year; net profit to mother was 73 million yuan, up 51.77% year on year; net profit after deducting non-return to mother was 67 million yuan, up 41.68% year on year, and profit side growth far exceeded expectations.
Pharmaceutical research and clinical services are two-wheel drive and continue to expand diversified business areas. (1) The pharmaceutical research sector's revenue in 2023 was 569 million yuan, up 28.67% year on year, and gross margin was 67.41%; by the end of 2023, the number of pharmaceutical researchers reached 1002, an increase of 20.00% year on year. In terms of drug discovery, the company focuses on research and development of innovative peptides and small nucleic acid drugs. The number of self-developed Class 1 drugs has reached 11. The phase 2 clinical trial of STC007 injection analgesia has been initiated, and phase 1 clinical trials for itching are underway; the formulation side has comprehensively laid out transdermal and local drug delivery technology platforms, and authorized SN001 and SN002 to KNK exclusively in mainland China, Hong Kong and Macau; the subsidiary Nuo He Shengxin laid out traditional Chinese medicine research and development, and established the pet medicine division Nuo and Ruipu. (2) The 2023 revenue of the Clinical Trials & Bioanalysis segment was 362 million yuan, up 54.54% year on year, and gross margin was 39.72%; by the end of 2023, the number of clinical service personnel reached 368, up 26.46% year on year. The company continues to expand its clinical layout. In 23, Sun Company Nanjing Novosin was officially put into operation to provide services such as registration, clinical operation, and digital control; Sun Company Meizu Pharmaceutical was registered and established to cover clinical fields such as drugs, devices and vaccines; and established Mesotech to provide clinical plan design, statistics and IND/NDA data writing services.
The independent R&D pipeline expanded rapidly, and downstream customer R&D demand remained strong. The company continues to promote project research and development to maintain competitiveness. The annual R&D expenses were 124 million yuan, an increase of 37.91% over the previous year. The number of R&D personnel reached 1,155, and the per capita output value was 746,900 yuan, an increase of 146,000 yuan over the same period last year. In 23 years, the company has set up more than 100 self-research projects, with a cumulative total of more than 350. 3 new drug projects have been approved for clinical use, 126 applications for marketing registration have been accepted, 77 drug production registration approvals have been obtained, 34 have passed the consistency evaluation, and obtained a total of 7 equity sharing projects for production approval. Up to now, the company has provided CRO services to more than 800 domestic customers. Customer stickiness continues to increase. New orders were signed in 2023, up 36.50% year on year, and cumulative stock orders reached 2,566 billion yuan, up 28.69% year on year. Sufficient orders in hand provided support for long-term growth. We believe there were seasonal fluctuations in clinical order delivery in the first quarter, but based on the high base of 23Q1, the revenue side continued to grow steadily, and the profit side increased dramatically. It is expected that the company's revenue and profit side will continue to grow at a high rate in the next few quarters.
Investment advice: Sunshine Nuohe is a unique generic drug development and development service company. The revenue side is expected to grow rapidly from Q2 in '24. We expect the company's revenue in 2024-2026 to be 12.44/16.46/2.161 billion yuan, an increase of 33.4%/32.4%/31.2% year-on-year, and net profit to mother of 2.50/3.33/440 million yuan respectively, corresponding to PE 25/19/14 times, respectively, maintaining the “recommended” rating.
Risk warning: risk of R&D failure, risk of long development cycle, management risk, industry regulatory policy risk, production safety risk, etc.