Event: On October 22, 2024, Nootech released its 2024 three-quarter report. The company achieved revenue of 1.252 billion yuan in the first three quarters, up 76.51% year on year, net profit up 0.35 billion yuan year on year, up 281.90% year on year after deducting 0.355 billion yuan in non-net profit, up 301.43% year on year; Q3 operating income of 0.421 billion yuan, up 36.31% year on year, net profit of 0.123 billion yuan year on year, up 146.86% year on year, after deducting 0.125 billion yuan of non-net profit 176.27%

The scale of the peptide API business has increased rapidly, and many major API orders around the world have been reserved. In the third quarter of 2024, the company achieved rapid year-on-year growth in revenue from peptide APIs such as GLP-1, establishing a leading edge in various dimensions such as product research and development, registration and reporting, and capacity construction. Through the global BD team, the company has prepared a number of high-quality customer orders: signed a cooperation agreement for simeglutide formulation and Liraglutide's first generic API in the South American market; signed the first innovative animal drug polypeptide CDMO project in the US market to reach liraglutide API cooperation; signed cooperation agreements with leading pharmaceutical companies for oral simeglutide and tilpotide APIs in Europe, and began delivery of 0.1 billion US dollar CDMO long-term supply contracts; China and customers reached strategic cooperation on GLP-1 innovative drug raw materials and formulations; in India and internationally Leading generic drug companies signed a global API sales contract for liraglutide preparations and signed a number of oligonucleotide CDMO services.

Tonnage production capacity continues to be released, and construction of the 601/602 peptide API workshop is being accelerated. The 106 workshop technical improvement project has been successfully put into operation. It is equipped with industrial robots, DCS automatic control systems, fully enclosed production systems, fully automatic synthesis systems, fully automatic cracking systems, and imported liquid phase preparation production lines. The production capacity of peptide APIs has now reached tonnage scale. Currently, the workshop is in the process of climbing production capacity. In terms of new production capacity: (1) The 601 peptide workshop was capped ahead of schedule, and 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 602 peptide workshop is expected to complete construction, installation and commissioning in the first half of 2025, and release another 5 tons/year of peptide production capacity; (2) The company has launched large-scale peptide and technological upgrading projects. In the future, it will add a larger tonnage of high-quality peptide production capacity to meet the needs of global customers for commercialized peptide raw materials. We believe that with the smooth commissioning of the company's 10-ton peptide production capacity, the delivery and fulfillment of commercial GLP-1 API orders in the global regulated market and non-regulated market, which is compounded with forward reserves, there is strong certainty that the company's performance will grow rapidly over a long period of time.

Investment advice: Nootai Biotech is a leading company in the peptide segment in China. It has an international standard quality system and large-scale peptide production capacity, and is expected to continue to grow rapidly in the future. We expect the company's revenue in 2024-2026 to be 1.748/2.339/3.147 billion yuan, up 69.1%/33.8%/34.5% year-on-year, and net profit to mother of 0.456/0.616/0.877 billion yuan respectively, corresponding PE to 31/23/16 times, maintaining the “recommended” rating.

Risk warning: risk of falling demand, risk of technological innovation, risk of increased industry competition, production risk, exchange rate risk, etc.