\u3000\u3 Guocheng Mining Co.Ltd(000688) 166 Brightgene Bio-Medical Technology Co.Ltd(688166) )
Key investment points
Performance: sustained high growth and marginal improvement of net profit margin
The company released the performance express in 2021, with a revenue of 259 million yuan in 2021, a year-on-year increase of 34%; The net profit attributable to the parent company was 244 million yuan, a year-on-year increase of 43.5%; The net profit margin attributable to the parent company was 23.2%, with a year-on-year increase of 1.6pct. Quarter by quarter, the revenue of 2021q4 increased by 10.7% year-on-year, and the net profit attributable to the parent company increased by 39% year-on-year. We believe that the company’s performance in 2021 is in line with our own expectations.
Growth driven: looking forward to new increment of China’s centralized procurement
The margin of net profit margin increased and the production capacity was gradually released. We believe that 2021q4 company’s net profit in the single quarter still maintained a high growth rate due to factors such as limited production capacity and rising costs, which can reflect the global competitiveness of the company’s API varieties. We are optimistic about the improvement of the global market share of the company’s main fenjing varieties and the profitability of entecavir and other varieties under the effect of scale. In addition, we are concerned that the total assets of the company at the end of 2021 increased by 62.45% compared with the beginning of the period, and the announcement said that “it is mainly due to the significant increase of projects under construction this year”. We are concerned that the company has increased the production capacity investment of preparations and APIs since 2020, and are optimistic that the new production capacity of the company will be gradually put down in 2022, and the sales ceiling of preparations and APIs abroad will be improved.
It is expected that the new increment of Chinese APIs and preparations will be collected in 2022. According to the announcement of Shanghai Sunshine drug procurement network on February 17, 2022, the seventh batch of information filling of national centralized drug purchase will be carried out from February 18, in which the varieties of Brightgene Bio-Medical Technology Co.Ltd(688166) APIs and preparations include oseltamivir oral constant release dosage form (the sales volume of oseltamivir capsule sample hospital in 2021 is 54.93 million yuan) Fondaparinux sodium injection (sales of sample hospitals in 2021: RMB 196 million), micafungin injection (sales of sample hospitals in 2021: RMB 214 million), etc. We are optimistic that the company will expand the incremental profits of generic drugs and API sales in China based on the advantages of API, and look forward to the support of new volume of centralized procurement in China.
Profit forecast and valuation
We expect the company’s EPS from 2021 to 2023 to be 0.59, 0.81 and 1.09 yuan / share respectively, and the closing price on February 26, 2022 corresponds to 49 times PE in 2021 and 36 times PE in 2022. We believe that the company is gradually transitioning from relying on large quantities of niche APIs to parallel markets outside China and taking into account both large and small varieties. The company’s investment in technology and production capacity in the field of highly difficult inhalation APIs and preparations is scarce. Under volume procurement, the performance elasticity of Chinese preparations and APIs is expected to exceed expectations and maintain the “overweight” rating.
Risk tips
Production safety accidents and quality risks; The sales of core preparation varieties are less than the expected risk; Risk of excessive investment in innovative drugs or project failure; Exchange rate fluctuation risk; Order delivery volatility risk.
