Core views
In the first half of 2024, the company's main product, recombinant human coagulation factor VIII, maintained rapid release, and its market share and penetration rate continued to increase; various antibody drugs and other products contributed to the increase in performance. The company is progressing in an orderly manner in the research pipeline. PD-1 is in the marketing application stage, 14-valent HPV is in clinical phase III, and a number of monoclonal and dual antibody products have entered the clinical stage. As the company's sales revenue continues to grow and the cost side is further controlled, the company is expected to maintain its performance growth trend in the second half of the year and turn losses into profits throughout the year.
occurrences
The company released its 2024 semi-annual report, and the results were in line with expectations
On August 21, the company released its 2024 semi-annual report, achieving: 1) operating income of 1.305 billion yuan, a year-on-year increase of 61.45%; 2) net profit attributable to mother 0.126 billion yuan, compared to the same period last year -0.138 billion yuan; 3) net profit not attributable to mother 0.34 billion yuan, compared to the same period last year - 0.2.2 billion yuan. The company turned a loss into a profit in the first half of the year, and the performance was in line with expectations.
Brief review
The VIII restructuring factor maintained rapid growth. In the first half of the year, it turned losses into profit in the second quarter of 2024. In the second quarter of 2024, the company achieved operating income of 0.692 billion yuan, up 44.41% year on month, and maintained month-on-month growth; net profit to mother was 0.5.1 billion yuan, up 239.90% year on year; net profit after deducting non-return to mother was 0.183 billion yuan, up 401.83% year on year. 2024H1 achieved significant revenue growth, mainly due to the fact that its main product, recombinant human coagulation factor VIII, maintained rapid release, continued increase in market share and penetration rate, and products such as antibodies contributed to sales revenue. The profit side turned a loss into a profit, mainly due to continued growth in sales revenue and a year-on-year decline in operating costs and R&D expenses.
Recombinant factor VIII maintained rapid release, and antibody products contributed to increased performance. The company's recombinant human coagulation factor VIII is the first domestically produced recombinant VI II factor. With outstanding production capacity and cost advantages, as well as continuous academic promotion and market cultivation, sales maintained a rapid volume trend in the first half of 2024.
With the approval of pediatric indications, more demand for recombinant factor VIII drugs was released, helping to increase performance. In terms of antibody drugs, the company's CD20 monoclonal drug, repatumab, successfully entered the national medical insurance catalogue in December 2023. The two biosimilar drugs, adalimumab and bevacizumab, were approved for marketing and automatically entered the national medical insurance catalogue. 2024H1 has been connected to the Internet and hospitals in various regions one after another, gradually contributing to the increase in performance. The company's commercial product range is gradually increasing, and the product matrix is beginning to take shape. It is expected to continue to drive performance growth in the future.
The research pipeline is progressing in an orderly manner, and PD-1 is in the listing application stage. The company's overall R&D investment in 2024H1 was 0.476 billion yuan, a year-on-year decrease of 13.09%, mainly due to a decrease in investment in some R&D projects. In terms of the R&D pipeline, the 14-valent HPV vaccine SCT1000 has completed the third clinical phase III vaccination and is currently in the follow-up phase. Marketing applications for the two indications of PD-1 monoclonal antibody SCT-I10A monotherapy for first-line treatment of head and neck squamous cell carcinoma and first-line treatment with bevacizumab for liver cancer have been accepted. The IL-17 monoclonal antibody SCT650C is undergoing domestic phase Ib clinical studies for psoriatic indications, and a global multicenter (Turkey and China) phase II clinical study of ankylosing spondylitis indications has been initiated. In addition, SCTC21C, a monoclonal antibody product independently developed by the company for the treatment of CD38+ hematological malignancies, SCTB35, a double antibody product used to treat CD20-positive B-cell non-Hodgkin lymphoma, and SCTB14, a dual antibody product used to treat various solid tumors, have all initiated phase I clinical studies.
Continued expansion of overseas markets is expected to contribute to performance in the future. In terms of overseas markets, the company started with restructuring factor VIII. Up to now, it has signed contracts with partners in more than 10 “Belt and Road” countries, including Indonesia and Brazil, and is working hard to advance the commercialization process locally and strive to generate revenue contributions from listing in overseas markets as soon as possible. The company is also actively planning commercialization cooperation for other listed products in various “Belt and Road” countries. Currently, it has signed contracts with partners in the Philippines, Pakistan, Malaysia and other countries.
Revenue growth led to a reduction in the expense ratio. Net operating cash flow corrected in the first half of 2024. The company achieved gross profit of 1.26 billion yuan (+61.05%) and a gross profit margin of 96.58% (-0.24pct), which remained stable. 24H1 company sales expenses 0.308 billion yuan (+69.95%), sales expense ratio 23.58% (+1.18pct); management expenses 0.08 billion yuan (+28.21%), management expense ratio 6.17% (-1.60pct); R&D expenses 0.46 billion yuan (-7.45%), R&D expenses rate 35.26% (-26.25pct); financial expenses 0.5 billion yuan (+1.49%), financial expenses ratio 3.86% ( -2.28pct). The R&D cost rate declined significantly year-on-year, mainly due to the phased reduction in the company's R&D investment.
24H1's net operating cash flow was 0.131 billion yuan, or 0.175 billion yuan in the same period last year, mainly due to an increase in cash received from sales of goods and services; accounts receivable of 0.516 billion yuan at the end of 24H1, accounting for 17.00% of total assets, an increase of 39.11% over the previous year, mainly due to a sharp increase in sales revenue.
24H1 Company's non-recurring profit and loss was 0.215 billion yuan (0.116 billion yuan in the same period last year), including non-operating expenses of 0.277 billion yuan, an increase of 63.96% over the previous year, mainly due to a sharp increase in the company's external donations.
Outlook for the second half of 2024: Reorganization VIII maintains a volume pace, and the profit side continues to improve. We continue to be optimistic about the company's development prospects as a domestic innovative pharmaceutical company: With competitive production capacity and cost advantages, sales of the main product restructuring VIII increased dramatically in the first half of 2024, and it is expected to maintain the volume pace in the second half of the year. In terms of antibody drugs, repatumab, adalimumab, and bevacizumab continued to push forward online and hospital admissions in various regions in the second half of the year, which is expected to bring additional performance. As the company's sales revenue continues to grow and the expense side is further controlled, the profit side is expected to continue to improve in the second half of the year, and it is expected to turn a loss into a profit year-on-year.
Profit Forecasts and Investment Ratings
Excluding revenue and profits related to the COVID-19 vaccine, we expect the company to achieve operating income of 2,738 billion yuan, 3.496 billion yuan and 4.132 billion yuan respectively in 2024-2026, and net profit to mother of 0.296 billion yuan, 0.578 billion yuan and 816 million yuan respectively. It is expected to turn a loss into a profit in 2024, with year-on-year increases of 95.1% and 41.1%, respectively, from 2025 to 2026, equivalent to EPS of 0.67 yuan and 1.30 yuan respectively Yuan and 1.83 yuan/share, corresponding PE is 49.0X, 25.1X, and 17.8X, respectively. The purchase rating is maintained by comprehensively considering the progress of the company's R&D pipeline and future commercialization value.
Risk analysis
1. Market competition increases risk: Currently, there are many hematogenous and recombinant 8-factor products on the market, and many domestically produced recombinant 8-factor products are under development. The company's related products are facing fierce competition in terms of group entry and future market sales.
2. Product sales progress falls short of expectations: The company's revenue mainly comes from restructuring eight-factor products. If the commercialization progress of the company's main products falls short of expectations, it may affect the company's profit level and valuation.
3. New product development and launch progress falls short of expectations: In the process of developing new products, various emergencies may occur and the R&D progress may be delayed, which may increase the company's development costs. In terms of clinical trial results, products with good results in early or mid-term clinical trials may not have the same performance in later clinical trials. Clinical trial results for drugs under development may fall short of expectations, further causing delays in the time for the company to obtain drug registration approvals for candidate drugs, obtain drug registration approvals that are narrower than expected, and even unable to obtain drug registration approvals.