\u3000\u3000 Porton Pharma Solutions Ltd(300363) (300363)
Matters:
The company announced a new batch of purchase orders with Freida, with a scale of 681 million US dollars.
Ping An View:
The scale of orders exceeded expectations, and delivery was guaranteed in parallel in multiple ways
Judging from the contract information and the current situation of the industry, it is estimated that the order is the outsourcing order of intermediate production of covid-19 oral small molecule drug paxlovid, which is directly supplied to Pfizer’s factories. The scale of newly signed orders reached US $681 million, significantly exceeding the US $217 million of the company’s last large order. We judge that this renewal means that paxlovid’s global supply pattern is basically finalized and Porton Pharma Solutions Ltd(300363) has successfully become one of the suppliers. This is inseparable from boten’s continuous cultivation of customers in the past few years and the formation of a good mutual trust relationship with many customers, including Pfizer. It is believed that with the smooth progress of bilateral cooperation, boten can obtain more product orders from Pfizer.
The scale of newly signed orders is huge, and they are mainly delivered in 2022, which poses a challenge to the company’s capacity utilization efficiency. The company will start Yuyang’s newly reconstructed workshop as soon as possible to further improve the operation efficiency of DONGBANG and Changshou’s existing workshops. At the same time, it does not rule out multi pronged efforts to ensure order delivery by increasing outsourcing and purchasing capacity.
The high prosperity of the industry continues, and the medium and long-term growth can be expected
We have been tracking the changes of the industry for a long time. The existing information shows that the CXO industry, especially the back-end cdmo industry, will still be in a high boom state. Whether global pharmaceutical outsourcing gathers in China or more Chinese innovative products enter the late stage of R & D, it supports the continuous improvement of the industry.
China’s leading cdmo companies are further increasing capex to prepare for 2023 and subsequent business expansion. Boten is one of them. DONGBANG phase 2, Changshou 301 workshop, Yuyang reconstruction project, J-star expansion, Shanghai R & D center and preparation factory will be launched in the next two years to realize the dual improvement of technical capacity and production capacity.
At the same time, boten biology actively arranged the emerging CGT field and initially achieved a leading advantage. It is expected that after 2023, boten biology will gradually step out of the investment period, and the improvement of order quantity and scale makes it an important medium and long-term growth point of boten.
Maintain a “recommended” rating. Recently, due to the combined effect of various factors, CXO sector fell more and panic was released. We are full of confidence in CXO track and believe that changes in international relations and fluctuations in China’s short-term financing data can not shake the general trend of industry development. With the stock price adjustment, the cost performance of relevant companies has become prominent. According to the performance forecast and newly signed orders, adjust the company’s EPS forecast from 2021 to 2023 to 0.95, 2.24 and 2.58 yuan (original 0.91, 1.58 and 1.88 yuan), and maintain the “recommended” rating.
Risk tips: 1) if the investment and outsourcing ratio of global innovative drugs is lower than expected, it will affect the development of CMO industry; 2) The failure of drug research and development, the early termination of the project, or the sales of drugs after listing are less than expected, which may lead to the failure of large-scale production of corresponding orders; 3) Production accidents and warning letters from regulatory authorities may lead to the loss of orders and even customers; 4) Exchange rate fluctuations may cause exchange losses.
