Incidents:
The company released its 2023 annual report and 2024 quarterly report: in 2023, the company achieved revenue of 760 million yuan, an increase of 29.65%; net profit to mother was 135 million yuan, an increase of 86.06% year on year; net profit after deducting non-return to mother was 114 million yuan, an increase of 70.58% year on year. In the first quarter of 2024, the company achieved operating income of 185 million yuan, a year-on-year increase of 17.42%; net profit to mother of 0.23 million yuan, a year-on-year decrease of 10.22 million yuan; net profit after deducting non-return to mother of 20 million yuan, an increase of 7.74% over the previous year.
Incident reviews:
Performance has continued to grow rapidly, and profitability has improved markedly. In 2023, the company achieved revenue of 760 million yuan, an increase of 29.65% over the previous year, mainly due to the gradual elimination or weakening of interference from the external business environment with the development of clinical trial projects and a significant recovery in project business progress; the company achieved net profit attributable to shareholders of listed companies of 135 million yuan, an increase of 86.06% over the previous year, mainly due to improvements in project execution efficiency during the reporting period. In 2023, the company's net interest rate reached 17.73%, an increase of 5.38 pct over the previous year, mainly due to a sharp drop in the management expense ratio. The company's overall gross margin was 30.41%, up 3.12 Pct year on year.
New orders continued to grow rapidly. In 2023, the company signed a new tax-exclusive contract amount of 1,292 billion yuan, an increase of 23.89% over the previous year, maintaining a rapid growth trend. The increase in company orders is mainly due to global pharmaceutical companies and others continuing to invest in R&D capital, as well as increased demand for outsourcing services for clinical trials of new drugs from domestic and foreign pharmaceutical companies. As of December 31, 2023, the company's stock excluding tax contract amount was 1,881 billion yuan, an increase of 24.97% over the previous year.
The number of implemented projects has increased steadily, and service capabilities have continued to improve. As of December 31, 2023, the company has participated in more than 3,000 SMO projects. Among them, the company participated in 60 customer ADC projects, 75 dual antibody projects, 55 CAR-T projects, and executed 1,832 projects. The number of employees in the company increased from 3,638 at the end of 2022 to 4,186, including more than 4,000 business employees. The company has served more than 900 clinical trial institutions, with a coverage capacity of more than 1,300 clinical trial institutions, covering nearly 190 cities across the country. The company's main customers are international pharmaceutical companies or well-known domestic innovative pharmaceutical companies, and it has cooperated with the top 10 global pharmaceutical companies and the top 10 global CRO doing business in China.
Investment advice:
We increased the company's net profit for 2024-2026 to 1.62 (previous value 1.44) /1.95 (previous value 1.72) /223 million yuan, EPS to 2.65 (previous value 2.36) /3.18 (previous value 2.82) /3.64 yuan, respectively. The current stock price corresponds to PE 17/14/13 times. Considering that the company is a leading SMO company in China, covering a wide range of clinical institutions, continuing to expand revenue, and maintaining rapid growth in new order amounts, it will benefit from a further increase in the penetration rate of SMO in clinical pharmaceutical research and development and an increase in the concentration of the SMO industry. We upgraded its rating from “increase in holdings” to “purchases”.
Risk warning:
Risk of loss of personnel; growth in new contract amounts falling short of expectations; risk of litigation or disputes for clinical trial services; risk of declining gross margin; risk of business qualification risk.