Financial performance: Revenue was basically flat month-on-month, and profits were under pressure in the short term
2023Q1-Q3: The company achieved operating income of 5.134 billion yuan, a year-on-year increase of 14.22%; realized net profit of 287 million yuan, a year-on-year decrease of 37.91%; realized net profit without deduction of 283 million yuan, a year-on-year decrease of 37.30%.
2023Q3: The company achieved operating income of 1,777 billion yuan, a year-on-year increase of 9.44%; realized net profit of 20 million yuan, a year-on-year decrease of 87.62%; realized net profit without deduction of 0.14 billion yuan, a year-on-year decrease of 90.89%.
Growth capacity: Revenue was basically flat month-on-month. Bioengineering is an important part of the company's revenue. The company's Q3 was affected by changes in industry demand. It increased slightly year-on-year and remained basically flat month-on-month.
Looking at the split revenue structure, the company's investor exchange notes revealed that sterile preparations increased 7% from January to September last year, test packaging decreased 9% year over year, bioengineering increased 30%, solid preparations increased 5%, and revenue increased slightly year over year.
Looking at the subregion, Romaco's order situation in the first three quarters was relatively good under intense market competition. The amount of market inquiries and the number of orders grew rapidly, and it is expected to be profitable in 2023; the overall performance of overseas orders at the headquarters is good, international customer visits have accelerated, and overseas growth is expected to accelerate in 24 years.
Profitability: Gross margin declined significantly. The company's gross margin and net profit declined markedly in Q3 due to factors such as industry development, changes in customer and product structure, and increased competition in the pharmaceutical equipment market in 23Q4. The company achieved gross profit margin of 26.58% in a single quarter, down 11.1 pct year on year, sales expenses ratio of 10.57%, up 0.12 pct year on year; management expenses ratio was 7.44%, up 1.59 pct year on year; R&D expenses ratio was 7.68%, down 1.08 pct year on year, and the cost ratio was under pressure in the short term. On the profit side, the company achieved a net profit margin of 1.14% in the 2023Q3 single quarter, a year-on-year decrease of 8.9pct, and net profit to mother of 20 million yuan. Currently, the company is promoting cost reduction in an orderly manner from product development design and supply chain side, and the company's fixed costs are high, and the scale effect on profitability is remarkable. It is expected that gross margin and expense ratio will continue to recover.
The industrial chain continues to improve, and innovation drives growth
Since June 2023, the company's newly established business has progressed smoothly. By the end of September, Chutian Jingbang had orders of 115 million; Chutian Pate (peptide synthesis equipment), Chutian New Materials (pharmaceutical non-metallic components), and Chutian Boyuan (powder intelligent system equipment) further enriched the company's industrial chain layout. Hundreds of customers have signed orders for chromatographic fillers for the new business. Orders are expected to be 10 million this year, and the production base is expected to be completed by the end of March 2024.
At the same time, the company continued to increase investment in R&D. During the reporting period, it developed a full range of customized hollow fiber ultrafiltration membranes and microfiltration membranes, independently developed and implemented integrated smart warehousing and logistics systems, and Romaco Group launched R&D and innovation activities such as the Tecpharm Cotech Laboratory in China, diversifying the company's revenue ceiling.
Convertible bonds approved, transformed into a comprehensive service provider
The company's convertible bonds were approved by the Shenzhen Stock Exchange on November 23, 2023. This time, a total of 1 billion dollars will be invested mainly in the first phase of bioengineering construction projects and the Pharmaceutical Equipment and Materials Technology Research Center project. After completion, the project will provide safe and advanced large-scale bioreactors and dispensing systems for biopharmaceutical industries such as vaccines, antibodies, and biofermentation, to achieve efficient, high-quality, intelligent green production of large-scale biological reactions, and help the company transform and upgrade from an equipment supplier to a comprehensive solution service provider.
Profit forecasting and valuation
In view of current industry competition and declining capital expenditure, we have lowered our profit forecast. We forecast that the company's net profit due to mother in 2023-2025 will be 481 million, 554 million and 640 million, respectively, and EPS of 0.81, 0.94 and 1.08 yuan, respectively. Corresponding to the closing price on December 28, 2023, the 2023 PE is about 13 times. Maintain an “gain” rating based on comparable company valuations and industry positions.
Risk warning
Cyclical & volatile order delivery risk, merger and acquisition integration progress falling short of expectations, risk of impairment of goodwill, and risk of price reduction due to fierce market competition.