occurrences

Baicheng Pharmaceutical recently released reports for the first quarter of 2023 and 2024: In 2023, the company achieved revenue of 1.02 billion yuan (+67.5%), mainly because the company seized good development opportunities in the domestic drug development CRO market, deepened strategic partnerships with customers, strengthened R&D team building, and continuously enhanced the company's core competitiveness; the amount of new orders was 1.36 billion yuan (tax included, +35.1%), and sufficient orders guaranteed the company's performance growth; achieved net profit of 270 million yuan (+40.1%) after deducting non-parent net profit of 260 million yuan (+52.5%) 2024Q1 achieved revenue of 220 million yuan (+34.0%), net profit attributable to mother of 498.18 million (+42.1%), and net profit after deducting non-return to mother of 487.22 million (+41.0%).

R&D technical services and equity sharing have opened up a collaborative chain to maximize project value by business segment: pre-clinical pharmacy research revenue of 340 million (+54.8%), R&D technology transformation of 390 million (+77.7%), clinical services 190 million (+141.3%), CDMO 52.43 million (+152.4%), and equity sharing of 29.626 million (-48.7%). The company actively carried out equity sharing in commissioned R&D services and R&D technology achievement transformation to maximize project value; overall, it achieved revenue of 950 million yuan, an increase of 65.2% over the previous year, and a gross profit margin of 67.4%; of these, the independent R&D technology achievement transformation business transformed 104 projects.

The transformation of R&D technology achievements continues to advance rapidly. As of the end of 2023, Thermo Pharmaceuticals' CDMO services maintained high growth. By the end of 2023, the company had set up nearly 300 independent R&D projects that had not yet been converted, 59 in the pilot phase of expansion, and 19 in the production phase of verification. Research and development results in 2023 were 104 technology transformation projects, an increase of 57 projects over the same period last year; the company has 85 sales equity shares, and 13 projects have been approved. Thermo Pharmaceuticals obtained a total revenue of 190 million from internal and external customized R&D and production services, undertook more than 360 projects, and completed CDMO services for 280 commissioned R&D projects internally; Symer Pharmaceuticals undertook customized R&D and production service orders from external customers to achieve operating revenue of 52.493 million, an increase of 152.4% over the same period last year, and achieved a gross profit margin of 42.1%. As of December 31, 2023, Thermo Pharmaceuticals has completed project implementation and verification of more than 400 varieties, and registered 200 varieties.

Investment advice and profit forecasting

The company continues to strengthen the “technology transformation+contract development+equity sharing” business model. As of the end of 2023, the company added 1,360 billion new orders (+35.06%). Sufficient orders brought continuous growth to the company's performance growth. The forecast was raised. The forecast is that the company's revenue for 2024-2026 will be 13.72/18.21/2 billion yuan, respectively, with growth rates of 34.91%/32.66%/29.16%, respectively; net profit to mother was 3.57/487/652 million yuan, growth rates were 31.14%/ 36.62%/33.79%; EPS is 3.27/4.47/5.98 yuan/share, corresponding PE is 20.97/15.35/11.47. Maintain a “buy” rating.

Risk warning

Risks such as loss of core talent and technology leakage; increased risk of competition; and production capacity investment falling short of expectations.