Incident: The company released its 2024 quarterly report. In the first quarter of 2024, the company achieved operating income of 1,400 million yuan, a year-on-year decrease of 37.76%; net profit to mother was 282 million yuan, a year-on-year decrease of 55.27%; net profit after deducting non-return to mother was 255 million yuan, a year-on-year decrease of 58.88%.
Excluding large orders affected the continued rapid growth of the main business, and the European and American markets performed well. In terms of revenue split, 2024Q1 excluded the impact of large orders, and overall revenue was +15.21%. Among them, customers from the European and American markets excluded the impact of large order revenue in the same period of the previous year, +62.80% year-on-year. Looking at the business split, the small molecule business revenue was 1,223 billion yuan, +26.58% compared with the same period last year. Of these, 30 small molecule commercialization projects confirmed revenue and 148 small molecule clinical-stage projects confirmed revenue, including 41 clinical phase III projects. The emerging business achieved revenue of 176 million yuan, which was continuously affected by the domestic investment and financing environment, -29.30% over the same period last year. In terms of profitability, the company's overall gross profit margin in 2023 was 43.52% (-4.88pp), and the net profit margin was 20.14% (-7.88pp). Sales expenses 44.62 million yuan (+31.95%), expense ratio 3.19% (+1.69pp). Management expenses of 173 million yuan (+4.19%), cost ratio 12.33% (+4.96pp). Financial expenses -78.31 million yuan, cost ratio -5.59% (-7.23pp), R&D expenses 169 million yuan (+4.53%), cost ratio 12.10% (+4.89pp). Excluding large orders, we expect steady growth in the main business mainly due to the continued implementation of the company's small-molecule CDMO commercialization projects.
Small molecule CDMO+ emerging business is two-wheel drive, and long-term growth can be expected. 1) Small molecule CDMO: According to current orders, the number of verification and approval phase (PPQ) projects is expected to reach 28 in 2024, an increase of 40% over 2023, forming sufficient commercial order reserves, providing a strong guarantee for long-term steady growth. 2) Emerging businesses: ① Chemical macromolecules: By the end of March 2024, the total production capacity of solid phase synthesis was 10,250L, which is expected to reach 14,250L by the end of June 2024, and is expected to gradually contribute to the increase as production capacity climbs; ② Formulations: The number of domestic orders signed in 2023 was +50%; ③ Clinical research services: In 2023, 347 new project contracts were signed for clinical research services, including 44 new projects in superior fields such as CGT; ④ Biomacromolecules: By the end of March 2024, biopharmaceutical CDMO There are 71 projects, including 16 IND projects and 2 BLA projects.
Profit forecast and investment advice: Due to slight fluctuations in downstream demand due to COVID-19 orders, we expect the company's revenue to 2024-2026 to be 64.97, 78.18, 9.833 billion yuan, up -16.97%, 20.32%, 25.79% year-on-year, due to emerging businesses being invested, leading to a possible increase on the cost side. Net profit to the mother was 12.53, 16.29, and 2,053 billion yuan, up -44.78%, 30.02%, and 26.06% year-on-year. Consider that the company has become a domestic CDMO leader with comprehensive advantages such as technology, leading the rapid growth of the industry and maintaining a “buy” rating.
Risk warning events: The public data used in the research report may have the risk of information being delayed or not updated in a timely manner; risk of loss of core technicians; risk of rising raw material supply and prices; risk of environmental protection and production safety; risk of exchange rate fluctuations.