\u3000\u30 Shenzhen Quanxinhao Co.Ltd(000007) 39 Apeloa Pharmaceutical Co.Ltd(000739) )
Events
The company released its 2021 annual report on the evening of March 9. In 2021, the company achieved a revenue of 8.94 billion yuan, a year-on-year increase of 13.5%; The net profit attributable to the parent company was 956 million yuan, a year-on-year increase of 17.0%; The net profit deducted from non profits was 833 million yuan, a year-on-year increase of 20.5%; Achieve weighted average roe20 43%, a year-on-year increase of 0.25 percentage points.
Brief comment
Cdmo continued to boost the company’s performance by adding preparations in large quantities, and the company’s performance grew steadily
The company’s annual performance grew steadily, in line with expectations. From the perspective of single quarter, Q4 achieved a revenue of 2.543 billion yuan, a year-on-year increase of 22.9%; The net profit attributable to the parent company was 194 million yuan, a year-on-year increase of 3.9%; The net profit deducted from non-profit was 160 million yuan, with a year-on-year increase of 18.2%. In 2021, the company’s API, cdmo and preparation business achieved revenue of RMB 6.55 billion, 1.39 billion and 870 million respectively, with a year-on-year increase of 10.4%, 32.1% and 14.1% respectively. Cdmo business accounted for 15.6% of operating revenue; The gross profit margin of API, cdmo and preparation reached 19.2%, 43.1% and 57.4% respectively, with year-on-year changes of – 2.83%, 1.50 and – 0.21 percentage points respectively. In 2021, the production and sales volume of API intermediates of the company increased by 2.09% and 3.20% respectively; Cdmo production and sales increased by 1.28% and 10.72% respectively; The production and sales volume of preparations increased by 25.64% and 26.32% respectively. The growth of the company’s performance is mainly due to the growth of cdmo business income and gross profit. In addition, the preparation business has also contributed to a certain increment.
The number of cdmo projects increased rapidly, and the first preparation project was implemented
By the end of 2021, the company’s cdmo business accounted for 53% of foreign customers and 47% of Chinese customers, of which the new customers increased by 81% year-on-year. The company has 812 cdmo quotation projects, with a year-on-year increase of 50%, and 323 ongoing projects, with a year-on-year increase of 62%. Among the ongoing projects, there were 143 projects in the R & D stage, with a year-on-year increase of 63%; 180 commercialization projects (including 120 human medicine projects, 37 veterinary medicine projects and 23 other electronic materials projects), an increase of 61% year-on-year. In addition, the company’s transformation and upgrading strategy from “starting API + registered intermediate” to “registered intermediate + API” has also achieved remarkable results. The number of API cooperation projects increased significantly, with a year-on-year increase of 50%, of which 8 projects have been industrialized, 9 projects are in the verification stage, and 28 projects are in the R & D stage. The company has signed confidentiality agreements with 158 Chinese innovative drug companies and carried out business cooperation with more than 30 Chinese innovative drug companies. In 2021, the company has signed multiple ton scale orders to quickly realize industrialization. In addition, in 2021, the company completed China’s first preparation cdmo project, taking a strategic step.
The number of cdmo projects increased rapidly, and the first preparation project was implemented
By the end of 2021, the company’s cdmo business accounted for 53% of foreign customers and 47% of Chinese customers, of which the new customers increased by 81% year-on-year. The company has 812 cdmo quotation projects, with a year-on-year increase of 50%, and 323 ongoing projects, with a year-on-year increase of 62%. Among the ongoing projects, there were 143 projects in the R & D stage, with a year-on-year increase of 63%; 180 commercialization projects (including 120 human medicine projects, 37 veterinary medicine projects and 23 other electronic materials projects), an increase of 61% year-on-year. In addition, the company’s transformation and upgrading strategy from “starting API + registered intermediate” to “registered intermediate + API” has also achieved remarkable results. The number of API cooperation projects increased significantly, with a year-on-year increase of 50%, of which 8 projects have been industrialized, 9 projects are in the verification stage, and 28 projects are in the R & D stage. The company has signed confidentiality agreements with 158 Chinese innovative drug companies and carried out business cooperation with more than 30 Chinese innovative drug companies. In 2021, the company has signed multiple ton scale orders to quickly realize industrialization. In addition, in 2021, the company completed China’s first preparation cdmo project, taking a strategic step.
The three platforms of fluid chemistry, crystal and powder, synthetic biology and enzyme catalysis are blessed, and the high-end continues to be promoted
The company has built three engineering technology platforms: fluid chemistry, crystal and powder, synthetic biology and enzyme catalysis. The fluid chemistry technology platform has completed the implementation of several continuous projects and realized commercial production. The other two technology platforms are still under construction, and many projects are in the commercialization channel. In 2021, the company’s first commercial production line of fluid chemistry, the first cdmo modular flexible production workshop and a high standard automatic API workshop were successively completed and put into operation. The company’s high activity compound production workshop, cdmo global innovative drug service platform project and more API capacity expansion projects are also being promoted. After the completion of cdmo global innovative drug service platform project, it can form an annual production capacity of 1800 tons of high-end chemical APIs and 250 tons of high-end pharmaceutical intermediates. The new cdmo R & D building in Shanghai has been put into use at the end of February 2022.
API + preparation is in good shape, and the marginal improvement can be expected
In 2021, the company’s API business revenue increased and the gross profit margin was under pressure to a certain extent. On the one hand, it was affected by the price rise of upstream raw materials; On the other hand, the demand for antibiotics and antiviral varieties has also been under the pressure of the repeated epidemic, and the export has decreased. Looking forward to 2022, API is expected to pass the cost to the downstream through price increase. The impact of ubenimex’s withdrawal from medical insurance on the preparation business has been fully digested in 2020. In the first three quarters, the company won the bid for the fifth batch of national procurement of ceftazidime for injection; The refractory drug metoprolol succinate sustained-release tablets were successfully approved, and the phase III clinical trial of the innovative drug neu2000 continued to advance. In addition, in the first half of the year, the company selected levofloxacin for the fourth batch of national collection, and memantine hydrochloride tablets obtained the registration approval, which will also continue to boost the company’s preparation business. The production capacity of the company’s new production workshop of sterile preparations (100 million tablets) / tablets is planned to be expanded from 7 billion tablets / tablets in 2022, and the company’s production capacity of sterile preparations (100 million tablets) / tablets will also be expanded in 2022.
The expansion of production and capacity continued, and the substantial increase in contract liabilities confirmed the prosperity of cdmo orders
In terms of period expenses, the company’s sales, management, R & D and financial expenses in 2021 were 453 million yuan, 454 million yuan, 446 million yuan and – 14 million yuan respectively, with year-on-year changes of – 21%, 18%, 27% and – 121% respectively. The four expense rates were 5.1%, 5.1%, 5.0% and – 0.2% respectively, with year-on-year changes of – 2.2%, 0.2, 0.5 and – 1.0 percentage points respectively. The decline in sales expenses is mainly due to the decline in sales expenses of preparations, which we believe is related to factors such as centralized purchase; The continuous increase of the absolute amount and proportion of R & D expenses also reflects the continuous increase of the company’s R & D investment; Changes in financial expenses are mainly caused by changes in exchange rates. As of the 2021 annual report, the balance of the company’s projects under construction was 710 million yuan, a year-on-year increase of 346%, and the expansion of production and energy continued; The balance of contract liabilities was RMB 300 million, with a year-on-year increase of 122%. We believe that it is mainly due to the increase of advance payment from cdmo customers.
Profit forecast and investment rating
We estimate that the operating revenue of the company from 2022 to 2024 will be 10.7 billion yuan, 12.7 billion yuan and 15 billion yuan respectively, and the net profit attributable to the parent company will be 1.30 billion yuan, 1.65 billion yuan and 2.1 billion yuan respectively, with the corresponding growth rates of 37%, 26% and 27% respectively, and the PE will be 26, 21 and 16 times respectively. We are optimistic about the development prospect of the company’s cdmo business, the integrated layout of API preparations and the layout related to innovative drugs, and maintain the buy rating.
Risk analysis: the risk of cdmo business development falling short of expectations, the downside risk of API and intermediate prices, the risk related to new drug application and R & D, the risk of exchange rate changes, etc.
