Porton Pharma Solutions Ltd(300363) (300363)
Key investment points
Orders: the cumulative orders for a single project are USD 217 million, which will be delivered before 2022
On November 30, 2021, Porton Pharma Solutions Ltd(300363) received a new batch of cdmo orders related to small molecule innovative drugs from a large pharmaceutical company in the United States. The cumulative amount of the project was up to US $217 million, and the order delivery time was from 2021 to 2022. According to the announcement, the key customer has long-term cooperation with the company. Compared with the annual report information over the years, the customer has always been the third to fifth key customer of the company from 2018 to 2020.
Order delivery: it is expected that most of them will be delivered in 2022, with full capacity and accelerated delivery
According to the announcement node and possible pipeline drug analysis, we believe that phase III clinical and commercial drugs will be supplied in 2021 and 2022 respectively. Based on the characteristics of orders, we believe that the profitability of the company in 2022 is expected to improve with the full utilization of production capacity and more mature technical routes.
Capacity: Hubei Yuyang is the main increment of 2022
In 2021, the company’s capacity increment is mainly 109 multi-functional workshops, with a new capacity of 186m3. By 2021q3109, the comprehensive utilization rate of the workshop has reached 68%. We expect that the capacity utilization rate of the company is expected to reach 80% by the end of 2021. The company’s main incremental capacity supporting the growth in 2022 is the newly acquired Hubei Yuyang, which is expected to contribute 400-500 million yuan to the output value of the standard DONGBANG plant and will be put into use by the end of 2021. The remaining new capacity may be gradually realized in 2023. We believe that according to the current production scheduling plan of the company, the production capacity is still tight in 2022. It is suggested to pay attention to the implementation of new production capacity.
Long term: optimistic about the rise of local cdmo during the epidemic
In the announcement, the company warned that the execution of orders may be affected by the progress of new drug approval and demand changes of customers, and there may be a risk that some orders can not be fully fulfilled. However, we believe that the recent major related orders frequently disclosed by peers show the rise of local cdmo in the industrial chain. With the repeated epidemic, the effect of various epidemic prevention measures may be affected, but under China’s zero clearing policy, the stable supply capacity, technical capacity, undertaking capacity and delivery capacity of local cdmo have remained unchanged. We are optimistic about the iteration of local cdmo’s ability in the epidemic, the strengthening of long-term cooperative relations with key customers, and the improvement of medium and long-term industrial status.
Profit forecast and valuation
We believe that this large order is expected to improve the company’s capacity utilization and profitability from 2021 to 2022, and increase the company’s EPS from 0.84, 1.12 and 1.64 yuan / share to 0.91, 1.27 and 1.72 yuan / share from 2021 to 2023, corresponding to the closing price on November 30, 2021. The PE in 2022 is 79 times, maintaining the “buy” rating.
Risk statement
The volatility of the impact of depreciation of new fixed assets, equity incentive and exchange on apparent performance; Volatility of profit cycle of new business; The prosperity of investment and financing of innovative drugs declined.
