Performance summary: the company released its semi-annual report for 2021, with revenue of 690 million yuan in the first half of the year, + 6.2% compared with the same period last year; net profit of 116 million yuan, about + 10%; deduction of 97.98 million yuan, + 1.4%; and net operating cash flow of 110 million yuan, about-11% year-on-year. 2021Q2 achieved revenue of 353 million yuan in a single quarter,-3.42% of the same period last year; net profit of about 66 million yuan, + 6% of the same period last year; and about 53 million yuan of non-deduction, about 8% of the same period last year.
The proportion of preparation and CDMO business has increased, and the profit quality is expected to usher in a steady improvement. The company's apparent income and net profit grew steadily in the first half of 2021, with a gross profit margin of 37.1%, down 1.3pp from the same period last year. From a business point of view, the weak income growth rate and the slight decrease in gross profit margin are mainly due to the sharp decline in the market price of Satan in the API sector, and the return net profit of API subsidiaries dropped by about 42% compared with the same period last year. It is worth mentioning that the company achieved good preparation and CDMO business growth in the first half of 2021. The income of preparation subsidiary Tiankang and CDMO subsidiary Xuancheng Minohua increased by 47% and 110% respectively compared with the same period last year, and the net profit increased by 556% and 7937% respectively. It is estimated that the contribution of the company's preparation to CDMO net profit in the first half of the year is about 20%.
CDMO strategic cooperation landed, opening a new chapter in the development of the company. Xuancheng Minohua (Xuanmei) is the company's main CDMO production base, with an income of more than 100 million yuan in the first half of the year, almost reaching the level of 2020, and the net interest rate in the first half is about 4%, which is about 4% higher than the same period last year. The company is actively opening up customers and constantly replenishing CDMO orders. The production capacity of Xuanmei base is expected to continue to increase, and the net interest rate has much room for improvement. In the first half of the year, the company signed a 10-year strategic partnership with Merck Sha Dong and decided to establish a long-term and stable partnership in the fields of pet medicine, veterinary medicine and animal health. It marks Merck's full recognition of the company's research and development technology, production and quality in the field of API. Revenue from Mershadong's animal health business was about $4.7 billion in 2020, with a compound growth rate of about 7 per cent (including exchange rate effects) from 2015 to 2020. With the gradual deepening of the strategic partnership between the two sides, the proportion of revenue from the company's CDMO business segment is expected to increase to 3050% within 3-5 years, opening a new chapter in development.
The research and development of new products has been accelerated and laid the foundation for long-term development. The R & D cost of 2021H1 company is 26 million yuan, which is + 18% compared with the same period last year. At present, a total of 8 strategic joint development preparation products are under CDE review in China, and another 17 preparation varieties are under development. In the second half of the year, 3-4 projects will complete BE trials, and 3-4 varieties will be submitted for domestic registration and review. Apishaban tablets and isoniazid tablets are expected to be approved for consistency evaluation before 2022. The company continues to strengthen its R & D capacity and lay a foundation for long-term development.
Profit forecast and rating: the net profit from 2021 to 2023 is expected to be 220 million yuan, 310 million yuan and 420 million yuan respectively, and the corresponding pre-valuation is 24 times, 17 times and 12 times respectively, maintaining the "hold" rating.
Risk tips: 1) the risk of price fluctuation of raw materials; 2) the risk that the landing speed of strategic cooperation projects is not as fast as expected; 3) the progress of solid preparation construction projects is not as expected.
