The borosilicate molded bottle turned A and landed, and the increase in performance can be expected
Incident: Linuottebo borosilicate glass molded injection bottles recently passed the technical review by the Drug Evaluation Center of the State Drug Administration. The registration number has changed to “A” status on the CDE API, pharmaceutical excipients and pharmaceutical packaging registration information disclosure platform, indicating that the borosilicate glass molded injection bottles produced by the company can be officially marketed and sold in batches. We maintain our profit forecast. We expect the company to achieve net profit of 1.42/1.57/174 million yuan in 2024-2026, +115.2%/+10.6%/+11.0% year-on-year; EPS is 0.61/0.68/0.75 yuan, respectively, corresponding to the current stock price, PE is 29.1/26.3/23.7 times. As the volume of borosilicate molded bottles and consistency evaluations promote the penetration of borosilicate, the company's medicinal glass is expected to accelerate its release, and performance growth can be expected. Maintain a “buy” rating.
Production of borosilicate molded bottles has accelerated, with a long-term output value of 585 million yuan (1). The company's borosilicate molded bottle production capacity progress: the borosilicate molded bottle project was ignited and put into operation in August 2022, with a production capacity of 5080 tons; the borosilicate molded bottle project under construction had a production capacity of 1,1242 tons, reaching a total production capacity of 16,322 tons after delivery.
In the long run, the company will add 4,6574 tons of molded medicinal bottles with borosilicate in the future. After all of the above projects are put into operation, the cumulative production capacity will reach 62,896 tons. (2) Expected output value of borosilicate molded bottles: Assuming that the market price of borosilicate molded bottles is 9,300 yuan/ton, the output value corresponding to 5080 tons of production capacity is currently 47 million yuan, the corresponding output value of the project under construction with a production capacity of 16,322 tons after delivery is 152 million yuan, and the corresponding output value of the long-term planning project with a production capacity of 62,896 tons after delivery is 585 million yuan. (3) Continued expansion of downstream customers: As of June 2023, the company had completed visits to more than 200 downstream customers, completed 80 product samples from downstream pharmaceutical companies, agreed to carry out 18 stability and compatibility tests, agreed to 4 related reviews and approval, and officially launched 3 related companies.
Demand for borosilicate increased in “consistency evaluation+collection”
The penetration rate of borosilicate medicinal glass in mid-2023 is less than 20%, far lower than the 70% international penetration rate. The “Consistency Evaluation+Collection” policy promotes an accelerated increase in the medicinal penetration rate of borosilicate: since the fifth batch of collection, injectable products have accounted for more than 50%; since 2018, drug consistency evaluation approvals have increased dramatically. In 2021, 2022, and 2023, the number of injectable consistency evaluation approvals reached 689, 491, and 626, accounting for more than 60%. China Glass Network anticipates that 30% to 40% of medicinal glass will be upgraded from low borosilicate glass and soda-lime glass to medium borosilicate glass by 2030.
Molded bottles have an excellent competitive pattern and strong profitability
Borosilicate molded bottles are difficult to produce, and the competitive pattern is excellent: Currently, only 5 domestic companies have passed the A status for their borosilicate molded bottle products. There are few market participants and strong demand. As a result, supply and demand in the industry is currently tight. The gross margin of molded bottles of Shandong Pharmaceutical Glass has basically remained around 40%, which is significantly higher than the profit level of controlled bottles. The company's borosilicate glass molded bottles are expected to contribute to a high increase in the company's performance after batch sales.
Risk warning: The efficiency of the new ignition capacity fell short of expectations, the rise in raw material costs exceeded expectations, and the recovery in overseas demand fell short of expectations.