A leading clinical CSRO enterprise with a complete integrated layout of the entire clinical trial chain. Its main business includes clinical trial operation services, clinical trial site management services, biological sample testing services, data management and statistical analysis services, clinical trial consulting services, and clinical pharmacology services. The company can provide a complete registration service system for strategic consulting and registration of pharmaceuticals and medical devices in China, the US, Europe and parts of the Asia-Pacific region.

Demand for new drug research and development is still strong, waiting for the industry to pick up

1) The overall trend of global biomedical investment and financing is improving. According to Artery Orange, 2024Q1-3's global biomedical sector investment and financing increased 7.84% year over year. Among them, Q3 2024 fell 21.78% month-on-month compared to Q2. 2) China's innovative drug BD licensing transactions continue to be active, broadening funding sources.

According to Tiger Pharmaceuticals's performance presentation materials, China Innovative Pharmaceutical's down payment for foreign BD licensing transactions is increasing year by year, while the total potential scale of foreign BD transactions has also grown rapidly. 3) Demand for clinical trials remains strong, and the number of drug registration applications continues to grow. At the same time, a number of pharmaceutical innovation support policies have recently been introduced, and it is expected that industrial innovation vitality will gradually be unleashed.

Deeply cultivate CRO's full-chain service and continuously improve service efficiency

Endogenous and epitaxial expansion, digital systems and BA accelerate growth: 1) Clinical trial operation services are affected by industry competition, and the business is under pressure in the short term. CO Services is one of the earliest established and core business segments of the company. With the gradual recovery of the demand side of the industry, this business segment is expected to be further repaired. 2) Clinical trial site management service, perfect business layout, expected to continue to grow steadily. 3) Biological sample testing. With the acquisition and integration of Shanghai Hengling, the company's BA business will accelerate growth. 4) The data management and statistical analysis service business is one of the company's key businesses in recent years. It has strong profitability and has achieved further development along with overseas market development.

Orders are gradually being restored, and labor efficiency continues to improve. As industry competition intensifies and market demand faces new challenges, the company actively developed its business and achieved an additional contract amount of 0.976 billion yuan in 2023, an increase of 20.01% over the previous year. With the increase in the number of company contracts and the continuous optimization of management efficiency, human efficiency also continues to improve. In 2023, the company's per capita revenue reached 0.3533 million yuan, up 10.17% year on year; per capita profit generated 0.0796 million yuan, up 39.40% year on year.

Investment advice

We expect the company to achieve operating income of 0.781 billion yuan, 0.898 billion yuan, 1.047 billion yuan (YoY +8.3%/+14.9%/16.6%); net profit to mother of 0.14 billion yuan, 0.196 billion yuan, 0.255 billion yuan (-13.9%/+40.2%/+30.0%) in 2024-2026. Covered for the first time, a “gain” rating was given.

Risk warning

Market competition increases risk, risk of payment falling short of expectations, risk of exchange profit and loss, risk of impairment of goodwill, risk of customer demand falling short of expectations, etc.