Incidents:
The company released its 2022 annual report and 2023 quarterly report: in 2022, the company achieved revenue of 5.445 billion yuan, an increase of 34.01% over the previous year; the net profit of Guimo was 921 million yuan, an increase of 45.28% over the previous year; net profit after deducting non-Gumo was 927 million yuan, an increase of 61.70% over the previous year. In the first quarter of 2023, the company achieved revenue of 1,751 million yuan, an increase of 27.49% over the previous year; net profit of Guimu was 281 million yuan, an increase of 35.07% over the previous year; net profit after deducting non-return mother was 274 million yuan, an increase of 40.19% over the previous year.
Incident reviews:
Performance continues to grow rapidly, and profitability has improved. In 2022, the company achieved revenue of 5.445 billion yuan, an increase of 34.01% over the previous year. Among them, the sales revenue of the company's API and intermediates business was 1,637 billion yuan, an increase of 24.91% over the previous year; the sales revenue of the CDMO business was 3.417 billion yuan, an increase of 47.84% over the previous year, and its share of revenue increased to 63%. The company's revenue grew rapidly, mainly driven by the rapid growth of the CDMO business. The company's gross margin in 2022 was 34.66%, up 1.33 Pct from 2021, net interest rate was 16.91%, up 1.3% from 2021, and the cost rate for the period was 12.63%, down 2.06Pct from 2021, mainly due to a decrease in financial expense ratio due to exchange gains and losses.
Benefiting from the continuous commercialization of downstream products and pipeline optimization, the CDMO business continues to grow rapidly. 1) According to Novartis's announcement, in 2022, Entresto achieved sales revenue of 4.644 billion US dollars, an increase of 31% over the previous year (in US dollars, same below), Kisqali achieved sales revenue of 1,231 billion US dollars, an increase of 31% over the previous year. In Q1 2023, Entresto achieved sales revenue of 1,399 million US dollars, an increase of 28% over the previous year, and Kisqali achieved sales revenue of 415 million US dollars, an increase of 74% over the previous year. At the same time, Kisqali obtained positive data for phase III of adjuvant treatment in the future. It is expected that the market space will be further expanded. 2) The company's CDMO project pipeline is becoming more and more abundant, and a sustainable preclinical/clinical phase I, II, and III funnel-type project structure has been formed. In 2022, the company successfully passed the pre-marketing on-site verification of NMPA's new NDA drug program, and also successfully promoted the launch of China's first self-developed Class 1 drug to treat depression. Among the projects undertaken by the company, 26 projects have been marketed, 61 are in phase III clinical projects, and 764 are in phase I and phase II clinical trials, an increase of 6/12/182 from 2021, respectively. The projects cover treatment fields such as anti-tumor, anti-heart failure, antiviral, central nervous system and cerebrovascular treatment. The number of new drug items that have been submitted for NDA has increased markedly, which will continue to drive the company's rapid business growth.
Self-built acquisitions go hand in hand, and production capacity continues to expand. Through a combination of “internal construction, external mergers and acquisitions”, the company accelerates the construction of CDMO production capacity, further enhances the ability to undertake CDMO business, and enhances the synergistic effect of one-stop services for APIs and pharmaceuticals. 1) Internal construction: At present, the construction of a new 1,700 cubic cubic base in Taizhou (Phase I) of Ruibo is progressing in an orderly manner; Ruibo Suzhou has completed the main construction of the pilot plant and will carry out equipment installation work later. The peptide GMP production line has been completed; Rebel America has built a GMP multifunctional pilot workshop; Pharmaceutical Technology has completed the first phase of the expansion work; the first phase of the oral solid preparation workshop that has been built at the Siwei Pharmaceutical Formulation Base has been officially put into use, and has obtained the “Pharmaceutical Production License” C certificate, which has been contracted for formulation production services from many customers. 2) External mergers and acquisitions: The company acquired 51% of Kangchuanji Pharmaceutical's shares in the first half of 2022. In the same year, Kangchuanji Pharmaceutical completed the 2,600-square-meter R&D site expansion; it acquired 100% of Ruihua Zhongshan's shares in the second half of 2022, and the project has now been completed. By the end of 2022, the company's projects under construction were 839 million yuan, an increase of 77.99% over the previous year.
The API and intermediates business is developing steadily, and gross margin has declined slightly. In 2022, the company's API and intermediates business achieved sales revenue of 1,637 billion yuan, an increase of 24.91% over the previous year, and gross margin of 30.49%, down 2.02 Pct from 2021. Among them, sales revenue of anti-infective drugs, central nervous system drugs, non-steroidal drugs, and hypoglycemic drugs was 591/5.61/2.88/197 million yuan respectively, with year-on-year growth rates of 31.03%/45.06%/35.70%/-24.43%, respectively.
Results continued to grow at a high rate in the first quarter of 2023. In the first quarter of 2023, the company achieved revenue of 1,751 million yuan, an increase of 27.49% over the previous year; net profit of Guimu was 281 million yuan, an increase of 35.07% over the previous year; net profit after deducting non-return mother was 274 million yuan, an increase of 40.19% over the previous year. Mainly, the company continues to advance the strategy of “deepening” big customers and “expanding” emerging customers, improving the matrix management model oriented towards project operation, deeply expanding customer pipelines and product pipelines, and rapidly improving R&D capabilities and product delivery capabilities. The strong growth of the CDMO business has led to continued high growth in the company's overall performance.
Investment advice:
We expect the company's net profit to the mother for 2023-2025 to be 1,161/15.49/2,053 billion yuan, respectively, and the EPS to be 1.29/1.72/2.28 yuan respectively. The current stock price corresponding to PE is 25/19/14 times. Considering that the CDMO business project pipeline is becoming more and more abundant, some major commercialized varieties have benefited from continued growth in terminal market volume and sales; the steady development of the API business; and the steady progress of integration of raw materials and formulations; and we maintain their “buy” rating.
Risk warning:
Key CDMO orders fell short of expectations; risk of price fluctuations of APIs and intermediates; environmental policy risk; production safety risk.