\u3000\u30 Guangdong Tengen Industrial Group Co.Ltd(003003) 63 Porton Pharma Solutions Ltd(300363) )
Event overview
The company plans to acquire 100% equity of Kaihui pharmaceutical under Ruizhi chemical for 266 million yuan. After the transaction is completed, Kaihui pharmaceutical will become a wholly-owned subsidiary of the company. Kaihui pharmaceutical achieved an operating revenue of 131 million yuan and a net profit of - 84 million yuan in the first 11 months of 2021.
Analysis and judgment
It is proposed to acquire Kaihui pharmaceutical with RMB 266 million to strengthen the layout of the company's cro business capability
This time, the company plans to acquire 100% equity of Kaihui pharmaceutical with RMB 266 million, corresponding to 1.5 ~ 2 times of PS in 2021, which has a certain degree of cost performance. Kaihui pharmaceutical was founded in 2008 and located in Fengxian, Shanghai. Its core business is to meet the process R & D and production needs in preclinical and clinical stages. At present, it is in shutdown due to the transformation of production facilities. This acquisition will make up for the lack of the company's pilot workshop in Shanghai in a strategic sense, and form a supporting set with the Shanghai R & D center to be put into use (currently, the R & D center in Shanghai is also the largest R & D center of boten), so as to realize the consistency of front-end cro business. In addition, the company's merger and acquisition of Kaihui pharmaceutical will further improve the layout of the company's R & D team and the development of customer breadth, adding potential for subsequent performance growth.
The business inflection point was further established and the core competitiveness continued to improve
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 has ushered in an operation inflection point since 2019 after two consecutive years of strategic adjustment and transformation in 2017 and 2018, and has achieved brilliant performance for three consecutive years from 2019 to 2021, All further confirmed the changes in the fundamentals of the company.
Since the strategic transformation of the company in 2017, the R & D investment of the company has increased unprecedentedly, and various core technology platforms such as crystallization technology and active enzymes have been built. The number of BD has also continued to increase, the fundamentals and business capabilities have been rapidly improved and consolidated, the cro business has maintained sustained rapid growth, and the business structure has been more optimized and balanced. In the future, with the improvement of the company's capacity utilization and cro personnel's project management ability, the company's gross profit margin and net profit margin will continue to improve, and the profit side growth rate is expected to continue to exceed the revenue side growth rate. In the long run, the biological drug CMO and preparation CMO arranged by the company will open a broader space for the company. The existing chemical drug cdmo business has a good track and fast growth speed, which is expected to promote the company to maintain a compound growth rate of 30-35% in the next few years.
Investment advice
Regardless of the impact of the proposed merger and acquisition of Kaihui pharmaceutical, the performance expectation for 22-23 years is maintained, that is, the revenue in 22-23 years is 6.878/7.706 billion yuan and the EPS is 2.25/2.56 yuan, corresponding to the closing price of 80.71 yuan / share on March 9, 2022, and the PE is 35.94/31.51 times respectively, maintaining the "buy" rating.
Risk tips
Orders and revenue growth were lower than expected; The gross profit margin and net profit margin cannot be continuously improved.
