\u3000\u3 Shengda Resources Co.Ltd(000603) 456 Zhejiang Jiuzhou Pharmaceutical Co.Ltd(603456) )
Event overview
The company issued the 2022 restricted stock incentive plan (Draft): this time, it plans to grant 1.845 million restricted shares (from private placement), accounting for 0.2216% of the total share capital and the grant price of 23.82 yuan / share to 6 senior executives, 291 middle managers and core backbone (297 in total); The sales restriction period of the restricted shares granted for the first time in this incentive plan is 12 months / 24 months / 36 months from the date of completion of the registration of the part granted for the first time, i.e. 40% / 30% / 30%. The assessment year for the lifting of the sales restriction is three fiscal years from 2022 to 2024, i.e. the growth rate of the company’s deduction of non net profit in 2020 is not less than 115% / 180% / 260% respectively. It is preliminarily estimated that the total amortization expense is 435051 million yuan (188522166770/652.5814502 million yuan from 2022 to 2025 respectively), which has little impact on the overall profit.
Analysis and judgment:
Normalize the incentive mechanism for core employees and enhance the certainty of future business development and performance growth
The performance evaluation year of the restricted stock to be granted this time is 20222024, with the deduction of non net profit not less than 693 / 903 / 1160 million yuan respectively, which is significantly higher than the deduction of non net profit evaluation index of not less than 501 / 649 million yuan in 20222023 under the equity incentive plan in 2021. It also shows the company’s confidence and determination in future business development. Cdmo industry is a high-profile track with equal emphasis on scientific and technological attributes (Engineer cluster and low-cost advantage) + asset attributes. As a core participant in small molecule cdmo industry, the company plans to continue to carry out equity incentive for middle and senior management + core technical backbone in 2022 after implementing equity incentive plan for two consecutive years in 2020 and 2021, and normalize the equity incentive mechanism for core employees Deeply binding and attracting core technical backbone is conducive to the medium and long-term sound development of the company’s business and ensuring the certainty of future growth. Looking forward to the future, the company will continue to expand the development of major customers such as Novartis, Roche, Geely, shuotang and a series of small customers at home and abroad, superimpose self construction and acquisition of Teva Hangzhou plant, and is expected to continue to achieve rapid growth in the next 3-5 years.
The quasi first-line cdmo enterprises in strategic transformation will accelerate the building of Ruibo cdmo brand and build nests to attract Phoenix
The company established Zhejiang Ruibo in 2008 and officially began to provide cdmo business to pharmaceutical enterprises. In 2019, the company acquired Suzhou Novartis to accelerate the strategic transformation of cdmo business and become a quasi first-line cdmo business in China. In recent years, the company has continued to strengthen the layout of R & D capacity through the acquisition of American R & D centers, the construction of Hangzhou and Taizhou, the establishment of cdmo business service platform (Ruibo Life Science) and the acquisition of Teva Hangzhou factory meeting GMP standards, so as to accelerate the building of Ruibo cdmo brand and build a nest to attract Phoenix. In 2020, the company’s cdmo business achieved an operating revenue of 1.29 billion yuan, a year-on-year increase of 70.8%, accounting for 48.9% of the overall revenue. In the first half of 2021, the company achieved a revenue of 1.02 billion yuan, a year-on-year increase of 134.8%, accounting for 54.8% of the overall revenue. The proportion of cdmo business in revenue exceeded 50% for the first time, which also shows the success of the company’s strategic transformation. Considering that Novartis key customers will continue to contribute to the company’s core performance increment in the next 2-3 years and the performance increment brought by the continuous growth of core pipelines of other customers, we judge that the company’s cdmo business will continue to show a trend of rapid growth in the future.
Investment advice
As a quasi first-line cdmo enterprise in strategic transformation, the company has accelerated the building of Ruibo cdmo brand and built a nest to attract Phoenix. In addition, the characteristic API business has maintained steady growth under the background of China’s stricter environmental protection policies. Maintain the early-stage profit forecast, that is, the revenue of 21-23 years is RMB 4.022/5.289/6.809 billion respectively, the EPS is RMB 0.80/1.05/1.41 respectively, corresponding to the closing price of 47.40 yuan / share on March 2, 2022, and the PE is 59.59/45.11/33.54 times respectively, maintaining the “buy” rating.
Risk tips
The core technology backbone and management risk of loss, the risk of intensified competition, the loss of core technical personnel, the risk of exchange rate fluctuations, and the expansion of New Coronavirus’s epidemic affecting China’s external business.
