Core views

Nootech achieved revenue of 0.831 billion yuan in 24H1, an increase of 107% over the previous year, and achieved net profit of 0.227 billion yuan to mother, an increase of 443% over the previous year. The independent selection of products and customized production business performed well in the first half of the year. 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 24H1 semi-annual results

The company announced its 2024 semi-annual results. 24H1 achieved revenue of 0.831 billion yuan, a year-on-year increase of 107%, achieved net profit to mother of 0.227 billion yuan, a year-on-year increase of 443%, and realized net profit without deduction of 0.229 billion yuan, a year-on-year increase of 433%. Q2 achieved revenue of 0.476 billion yuan, a year-on-year increase of 147%, and achieved net profit to mother of 0.161 billion yuan, an increase of 672% over the previous year.

Brief review

Revenue grew rapidly, and performance was in line with expectations

The company 24H1 achieved revenue of 0.831 billion yuan, a year-on-year increase of 107%, achieved net profit of 0.227 billion yuan, a year-on-year increase of 443%, and realized net profit without deduction of 2.2.9 billion yuan, an increase of 433% over the previous year. Q2 achieved revenue of 0.476 billion yuan, a year-on-year increase of 147%, and achieved net profit of 0.161 billion yuan to mother, an increase of 672% over the previous year. The relatively rapid year-on-year growth in a single quarter is expected to be related to the relatively low 23Q2 base, but it maintained rapid month-on-month growth, mainly due to the company's continued release of independently selected products and an increase in revenue share. The 24H1 results are in line with previous performance forecasts.

Production capacity implementation in the peptide field is being accelerated, and global BD is actively promoting

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. 24H1 independently selected products achieved revenue of 0.545 billion, an increase of 119 percent over the previous year. The company's liraglutide and simeglutide APIs obtained the world's first US FDA DMF in February '24 after receiving the FDA FA Letter in February '24; in terms of production capacity, the new 601 peptide workshop was capped ahead of schedule. It is expected that installation and commissioning will be completed by the end of 2024 to achieve a peptide production capacity of 5 tons/year. The new 602 peptide workshop is expected to complete construction, installation and commissioning in the first half of 2025, and will release another 5 tons/year of peptide production capacity. The hard capsule production line in the oral solid formulation workshop of the new formulation factory passed the drug GMP compliance inspection in July this year, achieving an annual production capacity of 4.5 billion tablets of formulations such as oseltamivir phosphate capsules. At the same time, the company forward-looking layout of oligonucleotide production capacity, the project progressed smoothly, and the 705 workshop was capped.

With excellent product quality and production capacity layout, the company is actively developing BD. Currently, in the European market, we have cooperated with a number of leading generic drug companies for oral simeglutide and terpotide APIs; successfully reached liraglutide formulation as an API in the US market, and also expanded the first innovative animal peptide CDMO project; in the South American market, the company has signed a strategic cooperation agreement for simeglutide peptide formulations, and reached cooperation with leading generic drug companies to launch Liraglutide formulations on the market; in the Indian market, it has reached global marketing API cooperation for liraglutide formulations, and signed and promoted multiple oligonucleotide CDMO services; In the domestic market, the company and the head The company reached a strategic cooperation on GLP-1 innovative drug raw materials and formulations.

The customized business grew at an accelerated pace, and the level of profit remained high

The company's customized products and technical services mainly provide global innovative pharmaceutical companies with customized R&D and customized production services for innovative pharmaceutical intermediates and APIs, 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 ibovir. Other customers include world-renowned companies such as German BI, American Verte X, and Shuoteng.

24H1 customized products and services achieved revenue of 0.286 billion, a year-on-year increase of 86%, and gross margin increased to 60%, maintaining a high level of profit in the environment of increased competition in the CDMO industry. In '23, the company successfully signed a contract with a large European pharmaceutical company with a total contract amount of 0.102 billion US dollars. Delivery of the CDMO long-term supply contract began in 24Q2, and it is expected that the pace of delivery will continue to accelerate.

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. The CDMO business is growing rapidly in 24H1, and the profit level continues to rise. As the pace of large-scale project delivery accelerates in the second half of the year, it is expected to drive the company's customized production business to grow further.

Expense analysis: The cost rate is expected to continue to decrease. The profit level of 24H1's sales, management and R&D expenses were 3.34%, 15.71%, and 13.53%, respectively, -4.50pp, -6.64pp, and +3.58pp. Thanks to the scale effect brought about by rapid revenue growth, sales and management expenses dropped significantly. R&D expenses increased significantly due to increased investment in research projects and R&D personnel, leading to a significant increase in the H1 expense ratio. The overall cost ratio decreased by 7.56 percentage points year on year. The financial expense ratio was 0.61%, a year-on-year decrease of 0.34pp. 24H1's gross profit margin was 67.32%, and the scale effect increased 9.37 percentage points year on year, driving the company's net interest rate to 27.87%, up 17.93 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 17.71, 24.04, and 2.966 billion yuan in 24-26, with year-on-year growth of 71%, 36%, and 23%. Net profit of 4.31, 6.17 and 0.735 billion yuan was achieved, with year-on-year increases of 165%, 43%, and 19%, corresponding to PE 29, 21, and 17 times, maintaining 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.