Incidents:
On August 29, the company released its 2024 semi-annual report. 2024H1 achieved operating income of 0.394 billion yuan, a year-on-year increase of 13.16%, net profit to mother of 0.055 billion yuan, a year-on-year decrease of 11.33%, and net profit after deducting 0.048 billion yuan, a year-on-year decrease of 2.81%.
Comment:
Revenue was in line with expectations, with margins fluctuating. 2024H1's revenue increased 13.16% year over year, profit decreased 11.33% year over year, gross margin was 26.40%, down 1.99 pct from 23H1. Revenue growth was in line with expectations, and short-term profit fluctuated. We expect that the main reason is that government subsidies fell more year on year (24H1 government subsidy 0.32 million, 23H1 was 10.64 million, down 96.99% year on year) and the decline in order prices due to increased competition in the industry. Looking at a single quarter, 2024Q2 achieved operating income of 0.209 billion yuan, a year-on-year increase of 9.67%, net profit to mother of 0.032 billion yuan, a year-on-year decrease of 12.10%, and net profit after deduction of 0.029 billion yuan, a year-on-year decrease of 8.88%.
Q2 New orders have improved month-on-month, and the types of projects are constantly being enriched. The company signed new 2024H1 orders of 0.429 billion yuan, a year-on-year decrease of 31.89%. The main reason was that the company made trade-offs on some orders that did not meet profit indicators. Since the second quarter, market demand has gradually picked up, the company has increased its business development efforts, and new 2024Q2 orders have improved dramatically, with a year-on-month increase of 112.14%. Furthermore, as of 2024H1, the company's on-hand orders were 1.825 billion yuan, an increase of 4.07% over the previous year, which guarantees the transformation of future performance.
The types of projects are constantly being enriched, and customer service capabilities are constantly improving. The company is committed to undertaking SMO projects with innovative and high clinical value new drugs. Currently, the number of service projects is being diversified. Currently, the number of projects being implemented is 1,955, with a cumulative total of more than 3,200 service projects, including 1 TCR-T project, 72 ADC projects, 21 weight loss projects, 8 multi-antibody projects, and 62 CGT projects.
In addition, the company has continuously improved its customer service capabilities. As of 2024H1, there were 4,652 employees, including more than 4,460 business personnel, and a total of 930 clinical trial institutions, which can cover more than 1,300 clinical trial institutions, covering nearly 190 cities across the country.
Profit forecast and investment advice: We expect the company's revenue from 2024 to 2026 to be 0.859/0.967/1.088 billion yuan, up 13.04%/12.58%/12.53% year over year; net profit to mother is 0.127/0.145/0.172 billion yuan, up -5.83%/14.42%/18.68% year over year, corresponding to the current PE of 15/13/11 times, giving a “buy” rating.
Risk warning: risk of new orders falling short of expectations, risk of increased competition in the SMO industry, risk of order cancellation, risk of rising labor costs or loss of talent.