We believe that the market still has poor expectations for the company's development, and the company's 2023 performance is under relative pressure, causing the market to worry about the company's development. However, we believe that the company's development will reach an inflection point, and the performance side is expected to gradually improve. On the one hand, negative performance factors are gradually being eliminated, and the impact of issues such as LNP and downstream customer equity sharing is weakening; on the other hand, the gradual launch of new products from downstream customers, such as UCB muscle weakness products and domestic long-term interferon, is expected to bring about new increases in performance. The company's self-developed PEG products, medical and aesthetic products, etc. may also become a new engine for the company's development in the future. The polyethylene glycol industry has high barriers and large space, and is a race track with great potential for development. Covered for the first time, giving a buy rating.

Key points to support ratings

Jiankai Technology is deeply involved in the field of polyethylene glycol and has formed a leading edge. The company is committed to the industrialization of pharmaceutical polyethylene glycol derivatives, and is in a leading position in the country in technical fields such as R&D, production, and application of polyethylene glycol and its active derivatives in the pharmaceutical field. The company's implementation of an equity incentive plan can effectively increase the enthusiasm of company executives, core technology and business personnel. The company's performance from 2016 to 2022 showed an upward trend; the short-term decline in 2023 results was mainly due to the expiration of Tepo Biotech's sales commission contract, reduced LNP revenue, and order delivery times required by major overseas pharmaceutical customers that did not generate revenue in 2023. Q1 2024 was still affected, with revenue falling 30.20% year over year. Furthermore, the company's R&D investment is gradually increasing, and the R&D team is gradually deepening to help enterprises achieve polyethylene glycol technology innovation and product upgrades.

The polyethylene glycol industry has high barriers and large space, and is a race track with great potential for development. PEG is mostly used in drug modification and is the world's leading pharmaceutical molecular modification and drug delivery technology. The principles related to PEG are not complicated, but there are many difficulties involved in actual operation: high-purity PEG derivatives are difficult to synthesize; the variety of subtypes creates a new barrier at the application level of actual drugs. At the same time, PEG high-end technology can be mastered by only a few companies in the world, and there is a lot of space in the industry. In addition, more and more companies are shifting towards innovative drugs and innovative dosage forms. Innovative drug products in the true sense require high investment and are more difficult; and the way to achieve long-term efficacy and even efficiency through PEG modification is expected to gradually become an important direction for enterprise development.

Short-term disturbances have gradually cleared up, and an inflection point in operations is approaching. The company was affected by some factors in the short term, and the performance side was disrupted: COVID-19 LNP orders were drastically reduced, Tebao Biotech's Pegbin patent contract expired, and downstream customers gradually produced polyethylene glycol themselves. However, with the gradual launch of new downstream products, the pressure on performance is expected to gradually ease, and the inflection point of operation will be reached: for example, UCB's Zilucoplan is approved for listing, Dapirolizumab pegol is progressing steadily; Tebao Biotech's Pegin has been approved for listing, and Yipei and others are developing PEG chemical products with large market space; Anke Biotech's PEG recombinant human growth hormone injections are in the prenatal preparation stage, and the market can be expected. In addition, the performance of currently marketed products such as Aido, Freimax, and overseas medical devices is growing well and still has market potential. The company's self-developed PEG irinotecan products, medical and aesthetic products, etc. are gradually entering the harvest period to jointly build a new engine for future company development.

valuations

The company's net profit for 2024-2026 is expected to be 142 million yuan, 178 million yuan, and 220 million yuan respectively, and EPS is 2.34 yuan, 2.94 yuan, and 3.64 yuan, respectively. The PE corresponding to the current stock price is 31.7 times, 25.3 times, and 20.5 times, covered for the first time, giving it a purchase rating.

The main risks faced by ratings

Core technology iteration risks, product failure to meet customer needs risk, R&D does not present anticipated risks.