Incident Overview

On April 22, 2024, Baicheng Pharmaceutical disclosed its 2023 annual report and 2024 quarterly report: the company achieved operating income of 1,017 billion yuan in 2023, an increase of 67.51% over the previous year; realized net profit of 272 million yuan, an increase of 40.07% over the previous year. 1Q24 achieved operating income of 216 million yuan, an increase of 34.04% year on year, and realized net profit of 50 million yuan, an increase of 42.06% year on year.

Incident reviews

The revenue side continues to grow at a high rate, and the expense ratio is well controlled

The company achieved revenue of 1,017 billion yuan in 2023, an increase of 67.51% year on year; 1Q24 achieved revenue of 216 million yuan, an increase of 34.04% year on year. By sector, in 2023, the company achieved operating revenue of 531 million yuan (+77.97%), 392 million yuan (+77.66%), 30 million yuan (-48.74%), and 52 million yuan (+152.35%), respectively. The core business continues to grow rapidly.

The cost rate was well controlled, and there was a slight decrease. In 2023, the company's sales expenses ratio was 0.95% (-0.34pp), management expenses ratio 12.64% (-4.06pp), and financial expenses ratio -2.08% (+4.80pp).

Adequate reserves for orders and projects, and steady growth

In 2023, the company added about 1,360 billion yuan of new orders, an increase of 35.06% over the previous year; current orders amounted to 1,586 billion yuan, an increase of 18.90% over the previous year, providing a strong guarantee for continued growth in subsequent performance.

The transformation of self-research results has entered the harvest period. The CDMO Business Rapid Development Company's independent R&D technology achievement transformation business transformed 104 projects in 2023. By the end of 2023, the company had set up nearly 300 independent R&D projects that had not yet been converted. With the subsequent marketing and sale of some reserved drugs, it is expected to bring a continuous and stable share of sales rights to the company, further increasing the company's profits.

Thermo Pharmaceuticals obtained a total revenue of 193 million yuan 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. At present, Thermo Pharmaceuticals has completed more than 400 project implementation verification projects and applied for registration of more than 200 projects, ranking among the highest in the country. The company actively promotes the CDMO business, improves front-end business R&D efficiency, and further enhances the cohesiveness of cooperation with customers.

Investment advice

We expect the company's revenue for 2024-2026 to be 13.65/18.13/2,377 billion yuan, respectively; year-on-year growth rate of 34.1%/32.9%/31.1%; net profit to mother of 3.57/4.81/618 billion yuan, respectively; net profit growth of 31.2%/34.6%/28.6%; corresponding EPS for 2024-2026 is 3.28/4.41/5.68 yuan/share; corresponding PE is 21/16/12X, maintaining the “buy” rating.

Risk warning

Competition in the industry intensifies; order delivery falls short of expectations; risk of blocking the transformation of self-research results, etc.