Incident Overview

The company announced its 2024 three-quarter report: 24Q1-3 achieved operating income of 0.216 billion yuan, a year-on-year increase of 25.73%, realized net profit to mother of 0.027 billion yuan, a year-on-year decrease of 36.93%, and realized deduction of 0.017 billion yuan in non-net profit, a year-on-year decrease of 46.12%.

Analytical judgment:

Performance continues to grow rapidly, and overseas business contributes to performance flexibility

The company's 24Q1-3 achieved revenue of 0.216 billion yuan, up 25.73% year on year. Among them, the culture medium business achieved revenue of 0.18 billion yuan, up 59.15% year on year, and its overseas customer revenue increased 196% year on year, continuing the growth trend in the first half of the year; the CDMO business achieved revenue of 0.036 billion yuan, a year-on-year decrease of 39%. Among them, 24Q3 achieved revenue of 0.016 billion yuan in a single quarter, an increase of 9.27% year on year, and showing improvements. The gross margin for 24Q3 was 52.46%, which remained relatively stable compared to 52.07% in 23Q3 and 52.42% in 24Q2. It is expected that in the future, along with the increase in CDMO's capacity utilization rate and increase in the share of the medium business, a marginal gross margin increase will be achieved. The net profit margin for 24Q3 was 3.92%, showing a downward trend. It was determined that it was mainly affected by income tax rate adjustments, and income tax since the beginning of the year was calculated incrementally. Looking forward to the future, considering the international expansion of the medium business and the continuous growth in the number of domestic service pipelines, we determine that the medium business will show a rapid growth trend and contribute performance certainty to the company's medium- to long-term performance growth.

(1) Overseas business contributes to core performance flexibility: Overseas businesses such as 24Q1-3 media achieved a 196.48% year-on-year increase in revenue, and continued expansion of overseas business brought about performance flexibility.

(2) The domestic medium service pipeline continues the upward trend, laying the foundation for the company's medium- to long-term growth. 24Q1-3's medium business has a total of 230 service pipelines (8 commercialized, 26 phase III) that have determined service pipelines for the pilot process. This is an increase of 60 pipelines compared to the end of '23, a relative increase of 35.3%, continuing the trend of rapid growth.

Investment advice

As a leader in the domestic medium market, the company continues to benefit from the booming development of the domestic biopharmaceutical market and domestic substitution, and considering the collaborative development of the strategically arranged CDMO business and the medium business, we judge that the company will continue to grow rapidly in the next few years. Taking into account factors such as the cooling domestic and foreign investment and financing environment and the increase in share capital, the profit forecast for the previous period was adjusted, that is, the expected revenue for 24-26 was adjusted from 0.3/0.382/0.495 billion yuan to 0.306/0.498 billion yuan, and the corresponding EPS was adjusted from 0.52/0.76/0.99 yuan to 0.33/0.51/0.78 yuan, corresponding to the closing price of 39.09 yuan/share on November 1, 2024, PE is 120/77/50 times, respectively. Maintain an “Overweight” rating.

Risk warning

Industry competition heightens risks; customer pipeline advancement is uncertain; risk of losing core technical personnel; the release of new production capacity in the CDMO business falls short of expectations