The company released its 2024 quarterly report: 2024Q1 achieved operating income of 2,671 million yuan (yoy -2.0%), net profit to mother of 231 million yuan (yoy -33.8%), adjusted non-IFRS net profit of 339 million yuan (yoy -22.7%), after deducting net profit of 187 million yuan (yoy -46.0%).
Short-term results are under pressure: The main reasons for the decline in 24Q1 profit include: 1) one-time losses due to the integration of laboratory service operations in Shanghai and Ningbo/Beijing in Q1 and the closure of laboratories in Shanghai; 2) cost increases due to the increase in new employees in the second half of 2023; 3) year-on-year decline in revenue from changes in the fair value of biological assets; and 4) increased financial expenses.
Laboratory service sector: 24Q1 achieved revenue of 1,605 billion yuan, a year-on-year decrease of 2.92%, a month-on-month increase of 0.85%, and a gross profit margin of 44.14% (yoy-0.34ct).
CMC (small molecule CDMO) service: 24Q1 achieved revenue of 582 million yuan, a year-on-year decrease of 2.67%, a month-on-month decrease of 27.0%, and a gross profit margin of 27.90% (yoy-5.0pct). New orders for CMC services increased by more than 40% year over year. We expect that as orders are delivered one after another, sector revenue will continue to grow throughout the year, and gross margin will recover at the same time.
Clinical research services: 24Q1 achieved revenue of 392 million yuan, a year-on-year increase of 4.60%, and a month-on-month decrease of 17.6%. Among them, overseas clinical services and SMO business trends were good, driving steady revenue growth in the sector; the gross profit margin of 9.32% (yoy-4.7pct) was mainly affected by the increase in the number of employees and competition in the domestic market.
Macromolecule and CGT services: 24Q1 achieved revenue of 91 million yuan, a year-on-year decrease of 4.15%, and a month-on-month decrease of 20.7%. Among them, revenue from testing services declined, and gene therapy CDMO revenue maintained a growing trend; gross profit margin of -38.6% (yoy-26.9pct), mainly due to increased costs due to an increase in the number of employees.
Customer inquiries are picking up, and the signing trend is good: 24Q1 global customer inquiries and visits picked up compared to 23Q1. 24Q1 new orders showed a good trend. The total amount of new orders signed increased 20% + year over year, with the laboratory service sector increasing 10% + year over year.
Maintain a “Highly Recommended” investment rating. The company's operating cash flow performance is strong. It plans to use its own capital to repurchase part of the company's A shares through centralized bidding transactions. The total repurchase amount is not less than 200 million yuan and no more than 300 million yuan. It is planned to cancel all of the shares after this repurchase. We have long been optimistic about the company's competitive advantage in the international market. We expect that in 2024-2026, the company will achieve revenue of 127/144/16.7 billion yuan and net profit of 17/19.23 billion yuan, corresponding PE of 21/18/15 times, respectively, and maintain a “highly recommended” rating.
Risk warning: risks such as geopolitics, exchange rate fluctuations, new business development falling short of expectations, and insufficient capacity utilization.