Strong performance, sufficient new orders to lay the foundation for high future growth

The company released reports for 2022 and the first quarter of 2023, achieving revenue of 1,659 million yuan in 2022, an increase of 42.12% over the previous year; net profit of Guimo was 338 million yuan, an increase of 19.85% over the previous year; net profit of non-Gumo was 307 million yuan, an increase of 13.29% over the previous year. 2023Q1 achieved revenue of 451 million yuan, an increase of 26.80% over the previous year; the net profit of the mother was 102 million yuan, an increase of 31.58% over the previous year; after deducting the net profit of the non-return mother was 99 million yuan, an increase of 32.06% over the previous year.

As customer and market recognition of the company's R&D service capabilities gradually increased, the revenue side and profit side grew steadily. The amount of new orders signed in 2022 reached 3.458 billion yuan, an increase of 41.01% over the previous year. Adequate orders provided a guarantee for the company's performance growth. With the continuous release of laboratory production capacity, the company's future development and growth will be strong. Considering the slowdown in industry demand, we lowered the 2023-2024 and added the 2025 profit forecast. The estimated net profit for 2023-2025 was 491/715/1,039 million yuan (originally estimated at 721/1,097 million yuan), EPS was 5.64/8.22/11.94 yuan respectively, and the current stock price corresponding to P/E is 27.8/19.1/13.2 times respectively. Considering the rapid growth rate of the company's new orders and low valuation, maintaining the “buy” rating.

Forward-looking layout in the field of biomedical cutting-edge technology, establishing multiple API and formulation research technology platforms. In 2022, the company's drug discovery and pharmaceutical research business achieved revenue of 735 million yuan, an increase of 19.95% over the previous year; new orders were signed 1,291 million yuan, an increase of 23.71% over the previous year; the total number of R&D personnel was 1,798, an increase of 29.07% over the previous year.

In the field of drug discovery, the company proactively laid out popular fields such as chiral drugs, glycochemistry, ADC, nucleic acid drugs, etc., and gradually improved PROTAC technology and BSL-2 laboratories. In the field of pharmaceutical research, the company has established a number of API and formulation research platforms, and is currently expanding the field of development of small nucleic acid and nano-antibody preparations.

GLP laboratory production capacity grew steadily, and the scarce GLP qualification contribution performance of China and the US increased. In 2022, the company's pre-clinical research business achieved revenue of 924 million yuan, an increase of 66.86% over the previous year; new orders were signed of 2,167 million yuan, an increase of 53.83% over the previous year; the total number of R&D personnel was 1,092, an increase of 50.83% over the previous year. The company already has GLP qualifications from China and the US. The new test projects and the new experimental facilities in the Nanhui Park have all passed the NMPA GLP certification, and the GLP laboratory area has increased from 11,000 square meters to 29,000 square meters. In 2022, 97/12 of the new drug and generic drug projects the company participated in were approved for clinical trials through domestic NMPA and overseas FDA and TGA, respectively. China and the US both reported project revenue of 595 million yuan, an increase of 46.96% over the previous year.

Risk warning: declining demand in the drug development market, loss of core members, production capacity falling short of expectations, etc.