Incident summary
The company announced the 2023 annual report and the 2024 first quarter report, with 2023 revenue of 205 million yuan (yoy -29.69%), net profit to mother of 128 million yuan (yoy -425.90%), net profit after deducting non-return to mother of 134 million yuan (yoy -476.11%); gross profit margin -6.55% (yoy-50.96pp), net profit margin -62.41% (yoy-75.81pp). The decline in Heyuan Biotech's performance is due to continued external environmental and other factors, poor financing for downstream customers in the domestic gene cell industry, and a sharp increase in operating costs. 2024 Q1 revenue of 60 million yuan (yoy +93.48%), net profit to mother - 42 million yuan (yoy -32.85%), net profit after deduction - 47 million yuan (yoy -42.12%); gross profit margin -20.82% (yoy+0.64pp), net profit margin -71.00% (yoy+32.30pp).
Key points of investment
Actively expand overseas markets and continue to increase R&D investment
The 2024Q1 company's sales expense ratio is 19.31%, the management expense ratio is 33.51%, and the R&D expense ratio is 23.14%. In 2023, the company's sales expenses ratio was 20.49% (yoy+10.10pp), management expenses ratio was 31.03% (yoy+11.86pp), and R&D expenses rate was 24.86% (yoy+12.90pp). The increase in the three major cost rates in 2023 is mainly due to a significant increase in operating costs, continued investment in R&D, and active expansion of overseas markets.
The CRO business continued to grow, and the CDMO business consolidated its leading position. The company's gene therapy CRO business achieved revenue of 79 million yuan in 2023, an increase of 20.56% over the previous year.
The forward-looking layout of the CDMO business includes laying out various cutting-edge fields such as oncolytic viruses, AAV gene therapy, CAR-T/NK cell therapy, stem cells and mRNA. As of 2023, the company has helped customers obtain 32 Sino-US IND approvals, more than 330 cell and gene therapy CDMO projects, and more than 250 million yuan in new orders.
The construction of the base drives growth, and the release of production capacity looks forward to future development
At present, the company has 15 GMP gene therapy carrier production lines, 50L, 200L, 250L, 500L, 1,000L, and 2,000L comprehensive suspension process production lines with different specifications, wall bonding process production lines, and 20 production lines for various types of cell therapy. Part of the production capacity of the first phase of the base project was officially put into operation in September 2023, and will continue to provide one-stop CRO/CDMO solutions from DNA to NDA for the global gene and cell therapy industry.
Profit forecasting
Due to the adverse effects of domestic CDMO business development, order size, project delivery, etc., we expect the company's revenue for 2024-2026 to be 2.52/3.04/371 million yuan (originally 2024-2025 was 564/794 million yuan); net profit to mother of -1.26/-0.58 billion yuan (originally 2024-2025 was 0.772/103 million yuan); corresponding EPS was -0.19/-0.09/-0.02 yuan/share (originally 2024-2025) (0.15/0.21 yuan/share per year), adjusted to an “overweight” rating.
Risk warning: Order growth falls short of expectations, large order fluctuations affect performance, exchange rate fluctuations affect performance, capacity release falls short of expectations, and risk of loss of core personnel.