Investment highlights

For the first time, it covered Nootech (688076) to give it a rating that outperforms the industry. The target price is 88.00 yuan. Based on the PE valuation method, it corresponds to a P/E of 34.4x in 2025. We believe that the company has scarce production capacity for high-quality peptides, and will continue to benefit from high demand as production capacity expands. The reasons are as follows:

Deeply involved in peptide production, leading in technology+production+sales. The company focuses on peptide production, with small-molecule chemicals as supplements, and uses a two-wheel drive model for independent selection and customized research and development, and has achieved the layout of the entire intermediate-drug-formulation industry chain. After years of deep cultivation, the company has outstanding technical advantages in peptide production. It has established six leading technology platforms, which can achieve large-scale peptide production and effectively reduce costs. The company's production capacity is high, and several workshops have passed GMP inspections and customer audits. The core management team has an international perspective, and the business development team has completed a matrix upgrade. An equity incentive plan was announced in May 2023 to bind technical and business development backbone, and organizational strength was strengthened.

Polypeptides: Heavy varieties enter the release cycle, and high-quality production capacity expansion unleashes potential. With strong growth in sales of major GLP-1 drugs, demand for peptide APIs continues to be strong. We estimate that the potential demand for injections will reach 50 tons in 2030. Large-scale peptide production capacity is scarce, short-term large-scale production capacity has not yet been released, and the industry is in short supply. Nootech has broken through the technical bottleneck of large-scale large-scale production of long-chain peptide drugs. It has a large production capacity of 10 kg or more in a single batch of peptides, reducing production costs. The company has obtained an FDA First Approval Letter for APIs such as simeglutide and liraglutide, passed the FDA technical review, and the quality was recognized. The production capacity of peptide APIs has reached the tonnage scale, and the company expects the production capacity of peptide APIs to reach several tons by the end of 2025. We believe that with the gradual release of production capacity, peptide APIs have strong potential for growth.

Technical collaboration+industrial chain extension, business blossomed more. 1) CDMO: Auseno has outstanding small molecule liquid phase synthesis technology, which effectively helps improve large-scale peptide production technology. At present, CDMO has secured multiple orders, and it is expected that the results will gradually be fulfilled. 2) Preparation: Oseltamivir is rapidly released after entering collection, and pipeline reserves are abundant. 3) Oligonucleotides: The potential space is broad, and the layout is for oligonucleotide monomer (PMO) production.

What is our biggest difference from the market? We have made detailed estimates of industry demand and production capacity. We believe that the short-term situation where supply is less than demand will not change, and demand is booming. The company's large-scale production and cost control have differentiated advantages, and it is expected that the strong will thrive.

Potential catalysts: GLP-1 orders exceeded expectations, the volume of GLP-1 oral formulations released, and the scale of single production lines increased.

Profit forecasting and valuation

We expect the company's 2024/2025 EPS to be 1.86 yuan/2.56 yuan, respectively, and the CAGR will be 85.2% (2023-2025E). The first coverage gave a rating of outperforming the industry, and the target price was 88 yuan. The corresponding 2024/2025 P/E was 47.4x/34.4x, respectively. Compared with the current stock price, there is 33.5% upward space compared to the current stock price. The current stock price corresponding to the 2024/2025 P/E is 35.5x/25.7x, respectively.

risks

Price fluctuations of core products, loss of core technical personnel, fluctuations in API sales, formulation approval and sales falling short of expectations, exchange rate fluctuations, drug development risks, regulatory risks, and international trade risks.