Event: The company announced its semi-annual results for 2022, and achieved operating income of 130.0 million yuan, an increase of 6.7% over the previous year; realized net profit of 4.9 million yuan, a year-on-year decrease of 81.6%; realized net profit of non-homologated net profit of -7.1 million yuan, a year-on-year decrease of 129%.
Comments:
Affected by the pandemic, performance is under pressure in the short term, and it is expected to achieve restorative growth in the second half of the year. The company's main business site is located in Shanghai, and a large customer base is also concentrated in East China. Affected by the Shanghai epidemic in March-May, both the company's deliveries and customer receipts were greatly affected. The company achieved revenue of 57.3 million yuan in Q2, -15%/-21%, respectively. Looking at segments, the 2022H1 standardized model, model breeding, drug efficacy evaluation and phenotype analysis, breeding services, and customized model business achieved revenue of 41.2/44.4/20.2/12.8/9.5 million yuan, respectively, compared to +4%/+36%/+13%/+2%/-47%, respectively. Among them, the customized model business is mainly aimed at scientific research institutions. Customer epidemic control time is long, delivery and revenue confirmation have been greatly affected by the epidemic. Revenue has declined a lot; the model breeding business is a business that is settled regularly every month*day, and is less affected by the epidemic. The speed is remarkable; other businesses have been affected by the pandemic to varying degrees. The company fully resumed normal production and operation in June. It is expected that in the second half of the year, with the improvement of the epidemic and the release of strong downstream demand, the company's various businesses are expected to resume growth.
The profit side fluctuates greatly in the short term, mainly due to the impact of epidemic control and capacity expansion. The gross margin and net interest rate for the first half of 2022 were 41.5%/3.8%, year-on-year, -22.3 pct/-18.1 pct; looking at the Q2 quarterly period, Q2 gross margin and net profit margin were 30.8%/-15.8%, respectively. Compared with 202Q2, -30.6 pct/37.7 pct, and compared to 202Q1, 19.2 pct/-34.92 pct, profit margins fluctuated greatly in the short term. On the one hand, due to epidemic control, the company's shipments and customer receipts were affected. On the other hand, it was due to epidemic control. The expansion and increase in the number of personnel have led to a corresponding increase in costs. At the same time, due to the special nature of the company's business, the costs required to raise live mice will not be reduced due to the inability to deliver during the epidemic prevention and control period, and nearly half of the employees are stationed on site to close production and are heavily subsidized, leading to a further increase in costs.
R&D investment continues to increase, and production capacity has doubled. The company continued to increase R&D investment. 2022H1 spent 23.4 million on R&D expenses (+17%), and the number of R&D personnel increased from 76 to 90 at the beginning of the year. The company continues to enrich the gene-modified animal model library. As of 2022H1, the company has independently developed more than 8000 standardized models, an increase of about 800 over the beginning of the year, including 504 humanized models, an increase of 48 over the beginning of the year. In the first half of the year, the company added the Guangdong Zhongshan base and the Beijing Genetic Research Institute base, which doubled the production scale over the previous year, laying a solid foundation for the company's performance growth.
Overseas business is being expanded in an orderly manner to create new growth poles. The company participated in a number of international academic summits in the first half of the year and successfully received orders from major international pharmaceutical companies. The company has now established initial cooperative relationships with customers in the US, Europe, and Japan, and plans to further expand overseas markets by increasing capital by 30 million US dollars to US subsidiaries in the future. It is expected that in the future, with the further strengthening of overseas BD capabilities, the company is expected to gradually open up overseas markets with special products such as price advantages, customer reputation, and humanized mouse models.
Profit forecast: It is estimated that in 2022-2024, the company's revenue will be 3.4/4.9/660 million yuan, respectively, up 23.1%/43.3% /36.2% year on year, respectively; net profit for the return will be 0.6/122/170 million yuan, respectively, up 0.2%/100.4%/41.0% year on year, respectively. The current closing price corresponds to PE 69/34/24 times, respectively. The company is one of the leading domestic model animal companies. It continues to research and develop genetically-modified technology and genetically-modified animal models, while actively extending the upstream and downstream industrial chains and promoting a global layout. As the impact of the epidemic subsides, the company's performance is expected to continue to grow rapidly in the context of strong demand for life science and drug research and development. For the first time, the company's performance is expected to achieve a “buy” rating.
Risk warning: Iterative risk of upgrading general gene editing technology; risk that downstream demand falls short of expectations; risk that our own technology research and development cannot adapt to market demand in a timely manner; industry competition increases risk.