Incidents:
The company released its 2024 quarterly report. 24Q1 achieved operating income of 7.982 billion yuan, down 10.95% year on year. Excluding COVID-19 projects, realized net profit of 1.8% year on year; realized net profit of 1.942 billion yuan, down 10.42% year on year; realized deducted non-net profit of 2,034 billion yuan, up 7.30% year on year, and realized adjusted non-IFRS net profit of 1.913 billion yuan, down 18.3% year on year, in line with expectations.
Key points of investment:
TIDES's business is growing rapidly. According to the company's 24 quarterly report, 1) The chemical business achieved revenue of 5.56 billion yuan, a year-on-year decrease of 0.6%. Among them, D&M service revenue was 4.0 billion yuan, excluding specific commercial production projects, and D&M's business revenue increased 1.2% year on year. TIDES's business revenue reached 780 million yuan, a strong year-on-year increase of 43.1%. As of 2024Q1, TIDES's on-hand orders increased significantly by 110% year over year. 2) Testing business revenue of 1.49 billion yuan, of which laboratory analysis and testing revenue was 1.05 billion yuan, down 0.6% year on year, drug safety evaluation business revenue increased 3.7% year on year, maintaining the leading position in the Asia-Pacific industry. Clinical CRO and SMO revenue was 440 million yuan, up 11.0% year on year. Among them, the SMO business grew 26.4% year over year, maintaining the leading position in the Chinese industry. 3) The biology business achieved revenue of 550 million yuan, and revenue related to new molecular types in the biology business segment increased by 12.2% year-on-year, accounting for a continuous increase of 29.2% of the biology business revenue. 4) The high-end treatment CTDMO business revenue was 280 million yuan. As of 2024Q1, it provided process development, testing and production services for a total of 65 projects, including 2 commercialization projects, 5 clinical phase III projects (2 of which are in the preparation stage for listing applications), 9 clinical phase II projects, and 49 pre-clinical and clinical phase I projects. 5) The domestic New Drug Research and Development Service Department achieved revenue of 80 million yuan. As of 2024Q1, 3 new drugs developed for customers have been approved for marketing, 2 are innovative oral antiviral drugs, and 1 is a drug to treat tumors.
The company remains unchanged in its expectations for steady growth. According to the company's 2024 quarterly report performance presentation materials, the company maintained its 24-year revenue guide of 383-40.5 billion yuan, with a year-on-year increase of 2.7% to 8.6% after excluding COVID-19 commercialization projects. In addition, the company will continue to improve production and operation efficiency. After considering the rise in new production capacity and the impact of exchange rates, it is expected to maintain an adjusted non-IFRS net interest rate level comparable to 2023 in 2024, that is, maintain a high level of profitability.
Profit forecasting and investment ratings. The company provides integrated, end-to-end new drug development and production services for the global pharmaceutical industry, and continuously lowers the R&D threshold through unique “CRDMO” and “CTDMO” business models. Based on company guidelines, we keep our 24-26 forecast unchanged. We expect the company's net profit to be 100.0 billion, 10.61 billion yuan, and 11.48 billion yuan for 24-26, corresponding PE of 13 times, 12 times, and 11 times, respectively, maintaining a “buy” rating.
Risk warning: Orders are falling, global investment in innovative drugs is slowing down, global investment and financing falls short of expectations, industry competition is increasing risks, etc.