Overview of events

From April 28 to 29, 2022, Southern Model Biology disclosed its annual report of 2021 and quarterly report of 2022:

In 2021, the operating income was 275 million yuan, an increase of 40.31% over the same period last year; the net profit returned to the mother was 60.8609 million yuan, an increase of 36.59% over the same period last year, deducting the non-return net profit of 52.4783 million yuan, an increase of 60.36% over the same period last year; and basic earnings per share was 1.04 yuan. 2022Q1 realized operating income of 72.7063 million yuan, an increase of 33.88% over the same period last year, and net profit of 13.922 million yuan, an increase of 17.64% over the same period last year. Deducting non-return net profit of 9.0127 million yuan, a year-on-year growth rate of-16.30%, and basic earnings per share of 0.18 yuan.

Event comment

Revenue is growing steadily, and the proportion of high-margin business continues to increase.

In 2021, the company's revenue was 275 million yuan, an increase of 40.31% over the same period last year. The business segment of standardized model and efficacy evaluation is growing rapidly. Standardized model: the gross profit margin in 2021 is as high as 77.60%; the realized income is 94.91 million yuan, an increase of 77.59% over the same period last year; and the proportion of revenue is 34.48%, an increase of 7.15 percentage points over 2021. Efficacy evaluation and phenotypic analysis services: the gross profit in 2021 is 70.68%; the realized income is 38.15 million yuan, an increase of 111.05% over the same period last year; and the proportion of revenue is 13.86%, an increase of 4.61 percentage points over 2021.

In 2022, the growth rate of Q1 profit side slowed and the level of gross profit margin declined (2021Q1's overall gross profit margin was 49.89%). Mainly because the cost-side expenditure is business as usual, while the revenue side is affected by seasonal fluctuations:

Under the Spring Festival holiday and COVID-19 epidemic, the company slowed down in the first quarter, while the scale of production expanded, the number of employees increased, and the operating expenses such as salaries and rents paid in the current period increased.

Increase investment in R & D and persist in scientific research and innovation

Expenditure on R & D in 2021 was 47.9471 million yuan, an increase of 39.31% over the same period last year. The company insists on research and development to assist basic research in life science and drug creation demand animal model lines, constantly expanding the standardized model strain base, and enhancing customer and market recognition of the company's products. At present, it has more than 7200 kinds of standardized models developed independently. Especially in the frontier and key areas of disease research, such as immune checkpoints such as PD-1, PD-L1, CTLA-4, CD47, TIGIT, APOE4 type Alzheimer's disease, A big type B hemophilia and so on. On the other hand, the company continues to improve the pharmacological and pharmacodynamic service platform, carries out CRO services such as drug screening and pharmacological efficacy evaluation, and has established an one-stop service system from gene modified animal model construction to phenotypic analysis and pharmacological efficacy evaluation, which has advantages in meeting the needs of industrial customers in the research and development of innovative drugs.

Rapid growth of new orders and active expansion of overseas markets

The company continues to increase its market development efforts, the demand of scientific research customers and industrial customers for the company's genetic modification animal model and related technical services continues to rise, and the order volume has achieved rapid growth. The company signed a new order of 309 million yuan in 2021, with a growth rate of 38.87%. At the same time, the company actively carries out overseas layout and expands its business territory. At present, it has provided genetically modified animal models and technical services in the United States, South Korea, Singapore and other countries. Foreign market revenue in 2021 was 19.4383 million yuan, an increase of 80.68% over the same period last year. Foreign market accounted for 7.10%.

Continuous expansion of production capacity to lay the foundation for performance expansion

The company has actively expanded its production scale and has built a fully functional and technologically advanced research and development, production and technical service base for genetic modified animal models in Jinshan, Shanghai, with about 50,000 cages, which has been gradually put into operation. Up to now, the company has 4 production and R & D bases in Shanghai (Banxia Road, Jinke Road, Harley Road, Jinshan Road), with more than 100000 cages. It is estimated that the production capacity will reach 140000 cages by the end of 2022. In addition, the production base in Zhongshan, Guangdong will be put into operation at the end of March 2022, and the production capacity will be gradually released.

Equity incentive shows confidence, binding performance is growing steadily and rapidly.

In order to effectively enhance the cohesion of the core team and the core competitiveness of the enterprise, and promote the long-term development of the company.

The company launches the equity incentive plan, and intends to grant 1.164 million restricted shares to 78 directors, senior executives, core technical personnel and other incentive targets, with the performance evaluation target as operating income:

(1) the trigger value is 3.71 million yuan (CAGR 35%) for 501 pound in 2024; (2) the target value is 4.13 pound (CAGR 50%) in 2022 and 2024 respectively.

Investment suggestion

Taking into account the company's strong strength in the model animal industry, sufficient orders, steady expansion of production capacity and confidence boosted by the equity incentive scheme, we adjust our profit forecast, that is, the operating income in 2022-2024 is 3.82 billion yuan (RMB 367,000,000 yuan), and the year-on-year growth rate is 38.9%, 36.4% and 33.0%, respectively. The homing net profit is RMB 0.96 Universe 1.33 billion (the previous forecast is 2022-2023 corresponding to RMB 0.84-116 million); the year-on-year growth rate is 58.3%; the year-on-year growth rate is 38.3%; the EPS for 2022-2024 is 1.78 yuan per share (1.78 yuan per share for 2022-2023); and the PE is 52Comp3729X corresponding to the closing price on April 29, 2022, maintaining the "Buy" rating.

Risk hint

The epidemic situation intensifies; the industry competition intensifies; the order delivery is not as expected; the laboratory animal management risk; the technology iteration risk.