Main points of investment
Chinese pharmaceutical R & D outsourcing leader: since its establishment in 2000, the company has outsourced pharmaceutical R & D, applying for 319 clinical applications and obtaining more than 200 clinical approvals for category 3 drugs. Its customer base covers more than 40 of the top 100 Chinese pharmaceutical industry enterprises in 2014, which is far ahead in Chinese preclinical CRO enterprises. From 2013 to 2015, the business income of Huawei Pharmaceutical maintained rapid growth, exceeding 100 million yuan in 2015, an increase of 108 percent over 2014, and a net profit of 71.85 million yuan in 2015.
To build the closed-loop pharmaceutical industry chain of "CRO+ Pharmaceutical industrialization": since 2013, the company has successively established subsidiaries to lay out CRO whole industry chain: Lihua Biology engaged in clinical trial services, Nanjing Winold Pharmaceuticals engaged in CMO services, Nanjing Ximosibo engaged in BE/PK biological sample testing business and Nanjing Huanglong Biology engaged in MAH business. In September 2016, the company accelerated the construction of a pharmaceutical industrialization platform and jointly funded the establishment of a drug research and development, production and sales enterprise "Kangyuan Huawei" with Kangyuan Pharmaceutical Co., Ltd., which will enjoy the huge benefits after the drug listing.
The reserve of research projects is sufficient to support business growth, and generic drug consistency evaluation orders burst out: through years of accumulation, the company has sufficient reserves of new drug research projects to support the rapid growth of drug research and development business. It is estimated that the revenue of drug research and development projects from 2016 to 2018 will reach 195 million, 243 million and 308 million yuan, respectively. In addition, generic drug consistency evaluation orders will break out in the short term, contributing at least 200 million yuan to the company's operating income.
Investment suggestion
We estimate that the company's return net profit from 2016 to 2018 is 135 million, 193 million and 281 million yuan, and the EPS is 0.42,0.55 and 0.71 yuan respectively, and the corresponding PE is 43 times, 33 times and 25 times respectively. We have long been optimistic about the company's "preclinical research + clinical trials + testing business" collaborative development, "CRO+ drug industrialization" linkage of the whole industry chain platform layout, for the first time to "increase holdings" rating.
Risk hints: 1) Drug policy risk; 2) the number of generic drug consistency evaluation is not as good as expected.