Event description

The company released its 2023 semi-annual report, achieving operating income of 872 million yuan, an increase of 17.43% over the same period last year; net profit of 166 million yuan, an increase of 2.17% over the same period last year; and deducting non-net profit of 156 million yuan, an increase of 1.39% over the same period last year.

Event comment

The operating income has increased steadily, and the profit growth rate is not as fast as the revenue end. The main business developed steadily in the first half of 2023, and the growth rate of net profit was lower than that of the revenue end, mainly because the company actively introduced high-end R & D talents and optimized the structure of R & D personnel; in order to increase production capacity, the company continued to promote the construction and acceptance of new experimental sites, resulting in the growth of depreciation, long-term amortization and water, electricity and gas; the company increased investment in order to expand overseas markets. The gross profit margin in the first half of 2023 was 39.67%, which was lower than that of the same period last year.

Split each business segment: 1) preclinical research business 2023H1 revenue of 470 million, an increase of 17% over the same period last year. 2) 2023H1 revenue of drug discovery and pharmaceutical research business was 402 million, an increase of 18% over the same period last year. As of the first half of 2023, there were 2710 R & D personnel, 180 fewer than at the end of 2022, including an increase of 67 in preclinical research and a decrease of 247 in drug discovery and pharmaceutical research.

Newly signed orders are under pressure to actively open up overseas markets. 2023H1's newly signed order 1.557 billion, compared with 2022H1's newly signed order 1.668 billion, decreased slightly and decreased by 7% compared with the same period last year. Split each business segment: 2) pre-clinical research business newly signed orders of 901 million, a decrease of 9% compared with the same period last year. 2) the drug discovery and pharmaceutical research business signed 656 million new orders, a decrease of 4% compared with the same period last year. The growth pressure of newly signed orders is mainly due to weak domestic demand for pharmaceutical research and development, the company has stepped up its expansion and investment in overseas markets, and 2023H1 sales expenses are 34 million, up 38% from the same period last year. Due to the improvement of customer recognition, there were 179 new customers and a total of more than 2000 services during the reporting period.

With the development of medium-and long-term production capacity, the capacity of preclinical integrated service has been further enhanced. In order to follow the tide of new drug innovation, build a more comprehensive and efficient drug research and development system, and effectively improve the service capacity of drug discovery projects, the company recently completed the refinancing of A shares to 15 specific targets, with a net fund raised of 990 million. At present, the "Laboratory expansion Project of the Drug Discovery and Pharmaceutical Research and Application platform" has completed the main construction and is under construction of the park pipeline, and the "North Shanghai Biopharmaceutical R & D and Innovation Industrial Base Project" has officially started. This fundraising and construction project will significantly increase the company's service capacity for drug discovery, further expand the scale of existing business revenue, enhance market competitiveness and industry influence, and help the company through the industry cycle and build strength for medium-and long-term development.

We expect the company to achieve a net profit of 337 million yuan, 416 million yuan and 567 million yuan from 2023 to 2025, with a "buy" rating of 29 times, 23 times and 17 times the PE of the previous share price.

Risk hint

1. Domestic medical research and development is not as hot as expected.

2. The company's new production capacity fell short of expectations.