Incident: The company released its semi-annual report for 2022, achieving operating income of 833 million yuan (-5.88%), net profit attributable to shareholders of listed companies of 170 million yuan (-34.13%), net profit attributable to shareholders of non-listed companies of 146 million yuan (-40.91%) after deducting net profit attributable to shareholders of non-listed companies.
Second-tier varieties have begun to be released, and the revenue structure has been optimized. The company's revenue declined in the first half of 2022, mainly due to a certain decline in the price of the core variety pemetrexed during the renewal of collection contracts. Furthermore, sales volume declined due to intense market competition. However, the company's second-tier products have entered the release stage. Sales revenue of oxaliplatin injections (the fifth batch of winning bids collected) exceeded 144 million yuan, and the other 5 listed products contributed about 113 million yuan in revenue. The share of pemetrexed revenue in the first half of the year was about 68%, down 11.9 pct compared to the full year of 2021, and the revenue structure was optimized. Overseas sales revenue is about 31.7 million yuan, which has exceeded the annual revenue of 2020 by nearly 15%, which is basically the same as the same period in 2021.
The continuous improvement of the product hierarchy helps ensure continued growth in performance. In the first half of 2022, the company had several products approved for listing. In terms of overseas registration, octreotide acetate injection, valproate solution, levetiracetam injection concentrated solution, and proxafol injection have obtained marketing permission in the UK; oxaliplatin injection concentrated solution and docetaxel injection have obtained marketing approval in Germany. On the domestic side, bortezomib for injection, proxafil injection, levetiracetam injectable concentrated solution, and sodium valproate injectable concentrated solution have been approved for sale, respectively. Continued enrichment of the product hierarchy helps reduce the negative impact of the slowdown or decline in revenue growth of stock varieties on the company's overall performance, and ensures continued growth in performance.
R&D investment has increased, and innovative drugs and generic drugs have gone hand in hand. In the first half of 2022, the company's R&D expenses were 171 million yuan (+55.53%), accounting for 20.49% of revenue, an increase of 8.09 pct compared with the same period last year. In terms of innovative drugs, biopharmaceutical research and development mainly focuses on cutting-edge technology routes such as multi-specific antibodies, antibody-conjugated drugs (ADC), and mRNA cancer vaccines; small molecules focus on potential targets for combined use with proprietary biologics, and actively explore cutting-edge technology platforms such as PROTAC. Among them, HY-0003 (first-in-class, with better imaging effects than similar products) is expected to be submitted for clinical use this year. In terms of generic drugs, the company submitted marketing applications for sodium thiosulfate injection and octreotide acetate injection in the first half of the year. It is expected to continue to apply for more than 10 formulation projects, with an average of 10-20 production approvals per year on a rolling basis, and obtaining about 10 production approvals.
Profit prediction and valuation: Due to the decline in the price and sales volume of the core product pemetrexed and the increase in the company's R&D investment at the same time, we believe it will have a certain negative impact on 2022 performance, but the company has already entered a period of rapid product line enrichment. Through continuous improvement of the product hierarchy, and rapid collection and release, it can effectively distribute the pressure of price reduction for individual products in the medium to long term to ensure continued growth in performance.
We expect the company's revenue in 2022-2024 to be 1,761, 20.16 and 2,460 billion yuan, respectively, with year-on-year growth rates of -3.4%, 14.4%, and 22.0%; net profit of attributable net profit of 3.15, 365, and 478 million yuan, respectively, with year-on-year growth rates of -29.5%, 16.2%, and 30.8%. Based on the closing price of August 25, the corresponding PE is 30.2, 25.9 and 19.8 times, maintaining the “increase in holding” rating, respectively.
Risk warning: The price reduction for pemetrexed exceeded expectations; product approval/inclusion in collection was lower than expected, resulting in delays in release time; overseas registration/market development progress fell short of expectations.
