Dongcheng Pharmaceutical's transformation has become a leader in the domestic nuclear medicine industry. The company was founded in 1998 and officially entered the nuclear medicine field through the strategic acquisition of Chengdu Yunke Pharmaceutical in 2015. According to the company's financial report, after 2015, the company successively acquired companies such as GMS, Yitai Pharmaceutical, Nanjing Andike, and Midu Biotech to rapidly expand the nuclear drug business. At the same time, the company established Lan Nacheng's innovative nuclear drug research and development platform to accelerate the development and industrialization of innovative nuclear drug products. The company has gradually formed a complete nuclear drug industry chain layout from diagnosis to treatment, and has become one of the leading enterprises in the domestic nuclear medicine industry.
The three sectors are developing collaboratively, and performance is expected to rise steadily. The company's business spans the three major fields of nuclear drugs, APIs and generic formulations. Performance fluctuations in recent years have mainly been affected by various factors such as the epidemic, fluctuations in API export prices, formulation collection, and impairment of goodwill. We expect that the subsequent company's nuclear drug business is expected to benefit from the acceleration of the country's PET/CT installation pace and the increase in the commercialization contribution of new products, and maintain steady growth; the API business is expected to rise steadily as product prices recover; the impact of pharmaceutical business collection will gradually decrease and the contribution of new product launches will gradually decrease.
R&D in the nuclear medicine sector has entered a harvest period, and innovative assets lead value reshaping. The company uses Lanner as an innovative R&D platform in the field of nuclear medicine, and uses Andike as an imitation platform to independently develop +BD cooperative two-wheel drive, and innovation is gradually entering a harvest period. According to the company's 2023 annual report, the nuclear drugs being developed by the company, such as 99mTc labeled tetrisphosate, sodium fluoride, 99mTc-GSA, and APN-1607, are in the clinical stages of application or registration, and are expected to be marketed one after another in the next few years to drive a new growth curve. At the same time, the company is speeding up the deployment of innovative varieties around the world, and various therapeutic nuclear drugs such as PSMA and FAP have entered the clinical stage, and the company's value is expected to be re-evaluated as the clinical progress of these innovative pipelines.
Profit forecasting and investment advice. We expect the company's 24-26 EPS to be 0.37, 0.45, and 0.55 yuan/share, respectively. We are optimistic about a steady recovery in the company's operations, and new varieties of nuclear drugs are expected to drive the company's new growth curve. Referring to comparable company valuations, the company was given a 24-year 45 PE valuation, with a corresponding reasonable value of about 16.60 yuan/share, maintaining a “buy” rating.
Risk warning. There are risks that goodwill accounts for a high proportion of total assets; nuclear pharmacy expansion and PET/CT installation progress falls short of expectations; progress in research and development of new drugs under development falls short of expectations; and market competition increases risks.