华海药业(600521):签订VV116生产协议 经营持续上行

Huahai Pharmaceutical (600521): Signed a VV116 production agreement and operations continued to rise

中金公司 ·  02/01  · Researches

The current situation of the company

On January 31, the company announced that it had established a cooperation with Wangshi Bio on the production and supply of deuterium remidovir hydrobromide tablets ("VV116"), an innovative drug for oral nucleoside anti-novel coronavirus (SARS-CoV-2) class 1. Huahai Pharmaceutical Co., Ltd. will be entrusted with the production and supply of raw materials for the innovative drug VV116 and preparations for VV116 as one of the major suppliers of Wangshi Biology.


The OEM of new crown medicine is expected to thicken the company's performance. On January 28, 2023, the State Drug Administration conditionally approved the listing of VV116 for the treatment of adult patients with mild to moderate COVID-19. We believe that with the normalization of COVID-19 prevention and control, COVID-19 's demand for specific drugs continues to exist, and OEM is expected to thicken the company's performance. The company has other layouts in the COVID-19 field, including (1) signing a Paxlovid localization production agreement with Pfizer Inc, and (2) obtaining a MPP license to provide Paxlovid combination therapy to 95 low-and middle-income countries, which has been submitted for production pending WHO approval.

The 2022 performance forecast exceeded expectations. The company's 2022 performance forecast shows that the company realized a net profit of 11.2-1.2 billion yuan (+ 130% YOY) and deducted a non-return net profit of 11.0-1.18 billion yuan (+ 1751% YOY). The performance forecast exceeded market expectations, mainly due to (1) the promotion of domestic collection and the lifting of the FDA ban in the United States, driving the production of preparations and APIs, and diluting fixed costs. (2) the exchange rate of the US dollar has risen sharply, and the exchange earnings have increased; (3) the company has comprehensively improved its fine management to help enterprises reduce costs and increase efficiency.

The upward trend of 4Q22 is more significant than that of the previous month. Based on the median of the performance forecast range, the 4Q22 of the company achieved a net profit of 365 million yuan, which was improved compared with the same period last year. The company's three major businesses of raw materials, domestic preparations and overseas preparations have all increased. Among them, domestic preparation renewal work has achieved good results, several new varieties have been added, overseas preparation Q4 has also begun to release, and the upward trend of management continues to verify.

Profit forecast and valuation

Taking into account the higher-than-expected increase in the company's exchange earnings, we raised the company's net return to home profit of 11.3% in 2023 to 1.478 billion yuan in 2057. currently, the company trades on a price-to-earnings ratio of 16 times 2023 in 2024. We maintain an outperforming industry rating, and taking into account the company's better-than-expected performance and the performance flexibility brought about by the new crown drug OEM, we raise the target price by 22% to 29.88 yuan (based on the 2023 comparable company Pamp E valuation), corresponding to 2023 Universe 2024, a price-to-earnings ratio of 30,22 times earnings and 39.3% upside.


The increase in the price of upstream raw materials leads to rising costs and pressure on gross profit margin; excessive price reduction in collection leads to a decline in gross profit margin of the company's preparations; excessive proportion of overseas income; litigation risk.

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