1H23 performed better than we expected
The company announced 1H23 results: revenue of $3.78 billion (+22.3% YoY); net profit to parent of $980 million (+1.4% YoY), mainly due to variable losses in fair value of convertible bonds of $230 million (1H22 was revenue of 13.81 million yuan) and bank loan interest of $63.58 million (1H22 was 7.29 million yuan); after deducting equity incentives and convertible debt-related expenses, adjusted net profit of 1.19 billion yuan (+20.1% YoY).
Due to rapid revenue growth, the company's revenue and adjusted net profit both exceeded our expectations.
The company is careful to maintain the double-digit growth guidelines for annual revenue and adjusted net profit unchanged.
Development trends
Turbiao's revenue is growing rapidly. At 1H23, the biopharmaceuticals sector had revenue of 2.91 billion yuan (+20% YoY), 1) the revenue of the tebiopharmaceuticals sector was 2.02 billion yuan (+28% YoY). The company's annual revenue increased by about 20%.
In 2022, Tebiao received CSCO guidelines for grade A drug recommendation for thrombocytopenia caused by tumor treatment. Indications expanded from chemotherapy to radiotherapy, targeted therapy, and immunotherapy. In addition, the Pediatric ITP submitted a marketing application in November 2022. The company expects to be approved in 2023 and 2025, respectively, for CLDT Phase III clinical enrollment. 2) The total revenue of ruby promoter is 600 million yuan (-13% YoY), which is mainly affected by collection in some provinces (accounting for about 20-25% of revenue before collection). The company said that the revenue and market share of non-harvesting provinces have increased markedly, and guided a single-digit increase in 2H23 revenue. 3) Yisaipu's revenue was 300 million yuan (+25% YoY), and the pre-filled dosage form was marketed in May. We believe it is expected to drive sales growth in 2H23 and 2024. 4) Cyptin's revenue is 110 million yuan (+60% YoY). We believe it would benefit from the 2022 medical insurance catalogue lifting restrictions on its combined use with Changchun Ruibin.
Hair health and CDMO are growing steadily. 1) Mandy 1H23 has revenue of 500 million yuan (+35% YoY). The company expects foam dosage form 2H23 to be approved and is suitable for patients with sensitive scalp or poor adherence. The company's layout of clacotterone cream to treat acne is in the clinical bridging stage. We are optimistic about the growth prospects of the skin and hair sector. 2) CDMO's revenue was 95 million yuan (+71.6% YoY). The company stated that 92% of the revenue came from commercial orders, 27 new 1H23 signed 27 new orders, and 160 million yuan in order.
The R&D pipeline is progressing smoothly. 1) Nephrology: Remitch was approved in June of this year. It is the first drug to treat pruritus on dialysis in China. The treatment of pruritus in liver disease was approved by the CDE for phase III clinical treatment; the long-acting phase III clinical trial of erythropotin completed patient follow-up, and the company expects an NDA in 2024. 2) Self-exemption: The company expects IL-17A/IL-1β/IL-4R/IL-5 monoclonal antibodies to be NDA 2024/2025/2026/2027. 3) Oncology: The VEGF/PD1 double antibody is in phase Ia clinical trial and has been approved by the US IND. The company expects second place in global progress.
Profit forecasting and valuation
Keep the profit forecast largely unchanged. The current stock price corresponds to 6.0x/ 5.3 x 2023/2024 adjusted P/E. Maintaining the outperforming industry rating and target price of HK$9.3 unchanged, corresponding to 8.3x/ 7.4x2023/2024 adjusted P/E, there is 39% upside from the current stock price.
risks
Collection prices have been reduced, R&D has failed, the competitive landscape has worsened, and commercialization of new products has fallen short of expectations.