Core views

Nootech's 24Q1 revenue side increased 71% year over year, and net profit after deducting non-return to mother increased 180% year over year. 24Q2 continued to maintain rapid growth. Net profit without return to mother is expected to increase by 319%-481% year-on-year in the first half of the year. The rapid increase in performance is mainly due to the continuous release of products selected by the company. In recent years, with the expansion of GLP-1 drug indications such as simeglutide and tirpotide to the weight loss field, sales have grown rapidly worldwide. As a leader in the field of peptide APIs, the company has a complete variety layout and leading production technology. With the gradual release of the company's production capacity, it is expected to continue to benefit from the rapid release of GLP-1 products in 24 years and maintain rapid growth in performance.

occurrences

The company released a semi-annual performance forecast

The company released the 2024 semi-annual performance forecast. It is estimated that 2024H1 will achieve net profit of 180 million to 250 million yuan, an increase of 330.08% to 497.34% over the previous year. Net profit without return to mother is estimated to be between 180 million and 250 million yuan, an increase of 318.59% to 481.38% over the previous year.

Brief review

Self-selected products continue to be released, and 24H1's performance exceeds market expectations. The company expects 2024H1 to achieve net profit of 180 million to 250 million yuan, an increase of 330.08% to 497.34% over the previous year. Net profit without return to mother is estimated to be between 180 million and 250 million yuan, an increase of 318.59% to 481.38% over the previous year. Q2 alone is expected to achieve net profit of 1.14-184 million yuan, up 443%-776% year on year, and 73%-179% month on month. The faster year-on-year growth is expected to be related to the relatively low base of 23Q2, but it still maintained rapid growth over the previous month, mainly due to the company's continued release of products independently selected by the company and an increase in revenue share. Wind unanimously expects the company to achieve net profit of 226 million yuan in 2024, and the 24H1 performance exceeds market expectations.

The field of peptides continues to be deeply cultivated, and there is a broad market for independently selected products

The company independently selects products in the direction of diabetes, cardiovascular disease, tumors, etc., with polypeptide drugs as the main focus and small molecule chemicals as supplements, and independently selects generic drugs with high technical barriers and good market prospects for an integrated layout of raw materials and formulations. At present, self-developed products have built a rich product pipeline, covering well-known varieties such as smeglutide, liraglutide, telpotide, and oseltamivir phosphate. By the end of '23, the company had obtained domestic API registration for 16 types of raw materials and domestic drug registration certificates for 7 formulation varieties; 12 pharmaceutical ingredients had obtained DMF/VMF numbers from the US FDA, and raw materials such as simeglutide, liraglutide, and oseltamivir phosphate had passed technical reviews related to the formulation. At the same time, the company was the first company in the world to register tiverpotide with the FDA. The company's liraglutide API received the FDA's First Approval Letter on October 5, 23, and subsequently, simeglutide also obtained an FDA FA Letter on December 10, marking that the quality of the company's two APIs has been approved by the FDA, which can directly meet the formulation declaration requirements of global customers, and also reflects the company's leading strength in this field.

In 2023, the company achieved sales of 180 million yuan of oseltamivir phosphate capsules, a year-on-year increase of 648%, mainly due to the high incidence of domestic influenza in spring and winter; sales of simeglutide in the raw materials sector were 130 million yuan, an increase of 571% year on year. Tilbertide achieved sales of 54.57 million yuan in the first year, an increase of 102% over the previous year, and liraglutide sales of 29.26 million yuan, an increase of 37% year on year, mainly benefiting from the increase in R&D demand for GLP-1 generic drugs. The global GLP-1 market has accelerated with the approval of GLP-1 drug weight loss indications in recent years. Novo Nordisk Smeglutide achieved sales of US$212 billion in 2023, and Eli Lilly's tibertide achieved sales of US$5.34 billion. Global sales will continue to expand in the future, and the company's performance is also expected to continue to benefit from the rapid growth of the GLP-1 industry chain.

Synthesis technology continues to break through, and production capacity expansion continues

The company continues to make breakthroughs in peptide synthesis technology. It has now established a large-scale production technology platform for peptides based on solid-liquid fusion, and has a large production capacity of side chain chemically modified peptides and long chain modified peptides in kilograms. Currently, the single-batch output of long-chain modified peptide drugs such as simeglutide and ibovir has exceeded 10 kg, which is at the leading level in the industry. By introducing short peptide fragment technology, the platform uses small molecule chemical liquid phase synthesis technology to synthesize short peptide fragments, and then performs solid phase synthesis to solve technical problems such as difficult sequences and difficult peptide segments quickly and efficiently, so that the company's products have greatly improved synthesis efficiency, yield, and product quality compared to traditional solid phase synthesis technology, and production costs have been significantly reduced.

The company currently has two production bases in Lianyungang and Jiande, which can provide customers with customized production services for different needs from clinical to commercial stages.

The Jiande plant currently has a production capacity of 1.07 million liters, the second phase of 180,000 litres of GMP production capacity was officially put into use in August 2023, and another 220,000 litres will be put into use in 24; the Lianyungang factory currently has 2 polypeptide API production workshops, 4 small molecule chemical API production workshops and 3 formulation production workshops. With the completion of the fund-raising project “106 Workshop Polypeptide API Product Technical Improvement Project”, the company's peptide API production capacity has now reached tonnage scale. In addition, the company is also planning to build a new peptide production plant, and production capacity for peptide APIs is expected to reach several tons by the end of 2025. Leading synthesis technology matches the continuous expansion of production capacity, which is expected to meet growing market demand and maintain the company's leading position.

The customized business gradually stabilized, and the profit level remained high

The company's customized products and technical services mainly provide customized R&D and customized production services for innovative pharmaceutical intermediates and APIs for innovative pharmaceutical companies around the world, involving various fields such as AIDS, tumors, and arthritis. The main products include Gilead's blockbuster anti-AIDS drug Biktarvy, Incyte's blockbuster innovative drug Ruxolitinib, and cutting-edge biological peptide anti-AIDS drug ibovirtine. Other customers include world-renowned companies such as German BI, American Vertex, and Shuoteng.

In 2022, due to factors such as the inability of overseas customers to attend audits, the company's customized business revenue fell 23.27%, and recovered in 2023, with a year-on-year increase of 3.07%. However, in terms of gross margin, the customization business has remained around 55% in recent years, basically stable, and has maintained a high level of profit in an environment where competition in the CDMO industry is intensifying. At the same time, in 2023, the company signed a GLP-1 innovative pharmaceutical ingredient CDMO cooperation with a well-known domestic biomedical company and agreed on a tiered supply price of the API after the customer's terminal preparation was approved for domestic marketing; it also successfully signed a long-term CDMO supply contract with a total contract amount of US$102 million with a large European pharmaceutical company, which will begin tiered supply in 2024. The signing of these two orders further reflects the customer's recognition of the company's technical strength, and also provides a stable guarantee for the steady growth of the company's customized business.

24-year outlook: Self-selected varieties continued to be released, and performance maintained rapid growth. The company's self-selected products such as oseltamivir phosphate, simeglutide, and tirbutide grew rapidly in 23 years. 24H1 continued to benefit from the release of independently selected products, and the company's profit side grew rapidly. Currently, pharmaceutical-side companies are actively developing new dosage forms and continue to lay out varieties that are difficult to prescribe and are in high market demand. Oseltamivir phosphate granules and suspensions are expected to be marketed in 24. The GLP-1 API market is in high demand, and the company is expected to maintain rapid growth in key varieties such as simeglutide, telbutide, and liraglutide after the production capacity expansion is completed. CDMO's business revenue is expected to maintain steady growth, and profit levels will remain high.

Expense analysis: The cost ratio is expected to continue to decrease, and the profit level will continue to rise. 2024Q1 The company's sales, management and R&D expenses rates were 3.23%, 19.83%, and 18.62%, respectively, -5.54pp, -1.49pp, and +8.99pp. Thanks to the scale effect brought about by rapid revenue growth, sales and management expenses dropped significantly, and R&D expenses increased significantly in Q1. The financial expense ratio was 0.91%, a year-on-year decrease of 1.04pp. Q1 The company's gross profit margin was 67.26%, and the benefit-scale effect increased 11.33 percentage points year on year, driving the company's net interest rate to mother to 18.64%, up 8.54 percentage points year on year, with a significant increase in profitability.

Profit forecast: The company has been deeply involved in the field of peptides for many years, the technology platform has been gradually improved, and the product range is rich and diverse. As a leading domestic peptide API, it is expected to benefit from the continuous expansion of the GLP-1 market for a long time and make continuous breakthroughs in order and performance. We expect the company to achieve revenue of 17.2, 21.15 and 2.63 billion yuan in 24-26, an increase of 66.6%, 25.0%, and 22.3% year-on-year. It achieved net profit of 402, 5.19, and 608 million yuan, an increase of 146.5%, 29.3%, and 17.2% over the previous year, corresponding to PE33, 25, and 22 times. For the first time, it was covered and given a “buy” rating.

Risk analysis: Industry competition intensifies risk: the company's main GLP-1 product market competition pattern is relatively good. In the future, as more participants enter, product prices may continue to decline, and increased market competition may cause the company's profit level to decline; in addition, if there is additional capacity supply in international markets such as India, it may have an impact on the price of the company's related varieties; overseas sales fall short of expected risk: the company's current sales of API products and future formulation products are used for export. If overseas demand falls, it will adversely affect the company's performance; risk of loss of personnel: the company's core Technicians are the main participants in the company's patents, scientific research projects, etc. The loss of technical personnel due to the departure of core personnel may adversely affect the progress of the company's ongoing research projects and the confidentiality of existing intellectual property rights;

Sensitivity analysis: As a leader in the field of peptide APIs, assuming that the amount of GLP-1 APIs released in 24-26 fell short of expectations and sales fell 20% from the current forecast, the corresponding 24-26 revenue of 15.7, 19.6, and 2.40 billion yuan was reduced by 8.7%, 8.8%, and 8.7% from the current profit forecast; the corresponding net profit for 24-26 was 3.6, 4.6 million yuan, and 540 million yuan, down 10.4%, and 11.2% from the current profit forecast.