Incident Overview
The company released its 2024 quarterly report: 24Q1 achieved operating income of 7.982 billion yuan, a year-on-year decrease of 10.95%, and realized net profit of 1.942 billion yuan, a year-on-year decrease of 10.42%, realized deducted non-net profit of 2,034 billion yuan, a year-on-year increase of 7.30%, and realized profit attributable to non-IFRS parent company holders of 1.913 billion yuan, a year-on-year decrease of 18.3%.
Analytical judgment:
Overall performance is under pressure. The TIDES business maintained a rapid growth trend. The company achieved revenue of 7.982 billion yuan in 24Q1, down 10.95% year on year, and 1.6% year on year after excluding COVID-19 commercialization projects. Overall performance was under pressure. We judge that it was mainly affected by factors such as declining global investment and financing sentiment and geopolitics. By business, drug discovery revenue YOY -4.9%, D&M business revenue (excluding COVID-19 commercialization projects) revenue YOY +1.2%, testing revenue YOY +2.6%, biology business revenue YOY -2.8%, CGT CDMO revenue YOY -13.6%, and DDSU revenue YOY -52%. Overall, all business lines were affected by factors such as the decline in investment and financing boom. The total number of the company's 24Q1 D&M pipelines reached 3,286, including 64 commercialized projects, 74 clinical phase III projects, 345 clinical phase II projects, and 2,803 pre-clinical and clinical phase I projects. Among them, a total of 11 commercialized and clinical phase III projects were added during the reporting period, adding certainty to subsequent performance growth. The company's TIDES business revenue reached RMB 780 million, a strong year-on-year increase of 43.1%, and by the end of the first quarter of 2024, TIDES orders had increased significantly by 110% year over year. Considering the increase in the volume of the peptide solid phase synthesis reactor to 32,000 L, we believe that the TIDES business is expected to continue the rapid growth trend in the future. According to the performance presentation materials of the company's 2024 quarterly report, the company maintained its 24-year revenue guide, that is, 383 to 40.5 billion yuan, with a year-on-year increase of 2.7% to 8.6% after excluding COVID-19 commercialization projects, and maintained steady growth expectations. In addition, the company will continue to improve production and operation efficiency. After considering the rise in new production capacity and the impact of exchange rates, it is expected that 2024 will maintain an adjusted non-IFRS net interest rate equivalent to 2023, that is, maintain a high level of profitability.
Investment advice
Considering the subsequent impact of the global investment and financing boom and the potential impact of the relevant US proposals on the company's business, profit side expectations for 24-26 were lowered, that is, 24-26 revenue was 392.70/453.12/53.306 billion yuan, and EPS was adjusted from 3.43/3.92/4.62 yuan to 3.14/3.67/4.34 yuan, corresponding to the closing price of 43.67 yuan/share on April 30, 2024, PE was 14/12/10 times, respectively, maintaining the “buy” rating.
Risk warning
Risk of loss of core technical backbone and management, risk of increased competition, risk of failure in growth strategies and business expansion, risk of loss of core customers, risk of exchange rate fluctuations, risk of drug price reduction in the US market, potential risk of US related proposals, and risk of illegal shareholders' holdings reduction in 2021.