The accelerated return of cdmo cost performance is worthy of long-term firm holding
Covid-19 order is a short-term performance booster, which actually improves the global voice of Chinese cdmo enterprises. The market generally believes that the large contract orders brought by covid-19 oral drugs are temporary influencing factors, which can not match the overvalued value due to the high performance growth brought by covid-19. At the same time, covid-19 orders occupy part of the production capacity, which may form a capacity run on non covid-19 projects. Therefore, after the continuous disclosure of large orders, the stock price of relevant cdmo enterprises has callback. However, we believe that covid-19 oral drug orders in the post epidemic era actually sounded the horn of industrial upgrading, and Chinese cdmo enterprises were included in the first echelon list of commercial supply of innovative drugs by large overseas pharmaceutical enterprises. Most cdmo enterprises of Chinese chemical drugs were established around 2000. In the early stage, they were in the period of expanding the market and building public praise. They mostly received orders for intermediates or APIs with low added value, and took the transfer of overseas industrial chain as the industry growth logic. After more than 20 years of development, we believe that at present, the Growth Logic of China’s chemical medicine cdmo enterprises has been transformed into industrial upgrading. It is no longer a low value-added CMO order transfer, but a high value-added cdmo order developed by using the core technology leading process.
The pattern of cdmo sub sections is differentiated, and the growth logic is different. We divide the cdmo sector into three sub sectors from the four dimensions of development stage, volume and scale, growth logic and company status, including the first-line cdmo with industrial upgrading as the main melody (including: Wuxi Apptec Co.Ltd(603259) , Asymchem Laboratories (Tianjin) Co.Ltd(002821) and Porton Pharma Solutions Ltd(300363) ), and the second-line cdmo benefiting from industrial transfer (including: Zhejiang Jiuzhou Pharmaceutical Co.Ltd(603456) , Apeloa Pharmaceutical Co.Ltd(000739) and Jiangsu Sinopep-Allsino Biopharmaceutical Co.Ltd(688076) ), And the characteristic cdmo with high elasticity brought by the large volume of back-end cdmo (including: Pharmaron Beijing Co.Ltd(300759) , Pharmablock Sciences (Nanjing) Inc(300725) , Shanghai Haoyuan Chemexpress Co.Ltd(688131) and so on).
Investment suggestion: Based on the high certainty of the company’s fundamentals, we recommend focusing on first-line cdmo Wuxi Apptec Co.Ltd(603259) , Asymchem Laboratories (Tianjin) Co.Ltd(002821) and Porton Pharma Solutions Ltd(300363) .
