Performance: Q3 revenue continued the high growth trend in the first half of the year
2023Q1-Q3: The company realized operating income of RMB 915 million yuan, with a year-on-year growth of 18.46%; net profit attributable to parent was RMB 192 million yuan, with a year-on-year decrease of 2.95%; net profit deducted from non-parent was RMB 188 million yuan, with a year-on-year growth of 3.59%.
2023Q3: The company realized operating income of RMB 327 million yuan, with a year-on-year growth of 20.38%; net profit attributable to parent company of RMB 82 million yuan, with a year-on-year decrease of 3.82%; net profit deducted from non-parent company of RMB 83 million yuan, with a year-on-year decrease of 4.09%.
Growth analysis: Optimistic about the commercialization of high-barrier varieties, pay attention to the progress of innovation pipelines, and from the perspective of sub-businesses, the company's product revenue business realized revenue of 249 million yuan in 2023Q3.(YOY 4.11%), of which API revenue is 232 million yuan (YOY 4.85%), preparation revenue of RMB18 million (YOY-4.43%); equity sharing revenue of RMB13 million (YOY 276.94%), which we estimate is mainly due to the growth of partner sales; technical revenue of RMB56 million (YOY 115.24%), which we estimate is mainly due to the completion of milestone delivery of technical service orders of the Company according to development progress.
Looking forward to the growth of the company from 2023 to 2025, we believe that: ① the varieties of high barrier APIs continue to be rich: according to the third quarterly report, the company's bromofudine API was approved in China in Q3 of 2023, and 9 varieties of budesonide suspension for inhalation, regano injection and regano API were applied for domestic application; Fondaparinux sodium injection submitted ANDA to the United States, iopromide API submitted CEP to Europe, we believe that with the commercial marketing of the varieties under review, the continuous rich API varieties are expected to maintain a relatively rapid growth under market development;② Preparation increment: in the eighth batch of centralized procurement, the company won the bid for Argatroban injection, oseltamivir phosphate dry suspension and other barrier varieties such as eribulin injection, and the proportion of preparation income of the company is expected to further increase; ④ Equity share income: According to the company's interim report,"the company has signed an exclusive cooperation agreement with the partner on product development and commercialization of eribulin mesylate injection generic drug in the United States. The company provides eribulin mesylate drug substance to the partner and cooperates with it to develop the drug product. From the research and development stage to the approval and commercialization of the cooperative product ANDA, the company will receive a down payment and milestone payment of no more than 8.5 million US dollars.", the company eribulin drug substance has been submitted to the DMF of the United States. We are optimistic about the Company's technology platform advantages, continue to promote the equity sharing business of products such as high-barrier APIs, and pay close attention to the clinical/milestone progress.
Pipeline progress, inhalation, according to the third quarterly report,"tiotropium olodaterol inhalation spray, tiotropium inhalation spray, salmeterol inhalation powder spray has completed process validation, tiotropium inhalation powder spray has completed pilot test". In terms of innovative drugs, BGC0228 for injection is in clinical phase I dose expansion study, expanding tumor types to include cervical cancer, ovarian cancer and gastroesophageal cancer, etc., and 13 subjects have been enrolled; BGC0504 injection for weight loss and type 2 diabetes treatment phase II clinical enrollment has been started. The company is steadily advancing in the research of generic drugs & innovative drugs, and closely monitors clinical progress.
Profitability analysis: Financial expense ratio and R & D expense ratio increased, affecting net interest rate. Gross profit rate of Q3 in 2023 was 63.16%, basically flat year-on-year. Period expense ratio analysis showed that Q3 financial expense ratio was 1.86%, up 4.51pct year-on-year; R & D expense ratio was 18.46%, up 1.84pct year-on-year; management expense ratio was 9.56%, up 0.57pct year-on-year; sales expense ratio was 5.1%, basically flat year-on-year; Under the influence of the above factors, the net interest rate of the Company in 2023Q3 decreased by 3.20pct year-on-year. We expect that with the listing of high-barrier varieties, the continuous increase of the proportion of preparation business income and the continuous investment in innovative drug research and development, the overall net interest rate of the Company will be basically stable from 2023 to 2025.
Business quality analysis: accelerated collection of accounts receivable
In terms of cash flow, net cash flow generated from operating activities decreased by 70.97% year-on-year in Q3 of 2023, net cash flow generated from operating activities decreased by 51.99% year-on-year in Q1-Q3 of 2023, and "net cash flow generated from operating activities/net income from operating activities" decreased significantly year-on-year.(Third Quarter Report 2023: 49.34%; Third Quarter Report 2022: 104.13%), mainly due to the year-on-year increase in the proportion of bills received and the year-on-year decrease in tax returns received. From the perspective of turnover rate, the turnover rate of accounts receivable of the Company increased in Q1-Q3 of 2023 (the third quarterly report of 2023: 2.85; the third quarterly report of 2022: 2.02), and the collection accelerated.
Profit forecast and valuation:
We expect EPS to be 0.62, 0.75 and 0.92 yuan/share respectively from 2023 to 2025, and the closing price on October 28,2023 corresponds to 67 times of 2023. We are optimistic about the scarcity of technology and production capacity of the Company in the field of high-difficulty APIs and preparations, and the value of innovation pipeline is highlighted gradually, maintaining the "overweight" rating.
Risk hint
Production safety accidents and quality risks; risk of sales of core preparation varieties falling short of expectations; risk of excessive investment in innovative drugs or project failure; risk of exchange rate fluctuations; risk of order delivery volatility