Incident: Prius published its 2024 interim report. In 2024 H1, the company achieved revenue of 0.394 billion yuan (YoY +13.16%), net profit attributable to mother 0.055 billion yuan (-11.33% YoY), and net profit not attributable to mother of 0.048 billion yuan (-2.81% YoY). In Q2 2024, revenue of 0.21 billion yuan (YoY +9.67%), net profit attributable to mother was 0.032 billion yuan (-12.10% YoY), and net profit not attributable to mother was 0.029 billion yuan (-8.87% YoY).
Comment:
Increased competition in the industry affects revenue side, and reduced government subsidies affect profit side performance. In 2024 H1, the company's main business-SMO business revenue reached 0.394 billion yuan (+13.16% year over year). Industry competition intensified, prices declined, and revenue performance was affected. In terms of profit margin, 2024 H1 achieved a comprehensive gross profit margin of 26.4% (-1.99pp), net profit margin of 13.93% (-3.85pp), net profit margin of 12.27% (-2.02pp) after deducting 2023H1, 10.64 million yuan in government subsidies, and 0.316 million yuan in 2024H1. The reduction in government subsidies affected net profit margins. In terms of cost ratio, the cost rate for the 2024 H1 period was 10.3% (+0.87pp), with sales/management/R&D/finance rates of 1.0% (-0.06pp)/5.6% (+0.44pp)/4.2% (-0.38pp)/-0.5% (+0.87pp), respectively.
New orders increased month-on-month, and on-hand orders supported development. 2024H1, the company's new orders (excluding tax) were 0.429 billion yuan (-31.8% year over year), mainly affected by price reductions due to increased competition in the industry. Market demand gradually picked up since the second quarter, and new Q2 orders increased 112.14% month-on-month; the company's 2024H1 on-hand orders (excluding tax) were 1.825 billion yuan (+4.1% year over year) to support the company's future development.
Comprehensive capabilities continue to be enhanced, and service capabilities are widely recognized. 2024H1, the total number of people in the company is 4,652, of which more than 4,460 CRCs have been implemented, and over 930 clinical trial institutions have been implemented. The scope of services covers many cities across the country, and the coverage capacity continues to increase. By the end of June 2024, the company had undertaken more than 3,200 domestic and international SMO projects, and had rich project experience in various disease fields. From 2018 to June 2024, the company participated in a high number and proportion of major disease projects: 26 new drug projects for hematological tumors in China, accounting for 44.83%; 23 new drug projects for thoracic tumors, accounting for 40.35%; 7 new drug projects for breast cancer, accounting for 29.17%; 11 new PD-1/PD-L1 monoclonal antibody drug projects, accounting for 57.89%.
Profit forecast and investment rating: We expect the company's revenue to be 0.882/1.032/1.207 billion yuan in 2024-2026, up 16.0%/17.0%; net profit to mother will be 0.135/0.158/0.199 billion yuan, respectively, up 0.0%/17.6%/25.3% year over year, corresponding to 2024-2026 PE 14/12/10 times, maintaining the “buy” rating.
Risk factors: Risks such as increased competition in the industry, declining demand for R&D investment and outsourcing, policy risks, and new business development falling short of expectations.