\u3000\u3 Shengda Resources Co.Ltd(000603) 127 Joinn Laboratories (China) Co.Ltd(603127) )
Report summary
The market scale of China’s drug safety assessment industry is growing rapidly, and the prosperity remains at a high level. Drug safety evaluation is an important part of the pharmaceutical R & D outsourcing industry. The market scale of drug safety evaluation in the world and China accounts for 7.7% and 6.1% of the market scale of cro industry in the world and China respectively. According to Frost & Sullivan report, the size of the Chinese market increased from US $140 million in 2015 to US $420 million in 2019, with a CAGR of 31.7%. In terms of the number of innovative drugs ind accepted by CDE, the number of accepted drugs reached 1526 in 2020, with a year-on-year increase of 51.99%, and the compound growth rate from 2016 to 2020 was 32.04%. From the perspective of China Meheco Group Co.Ltd(600056) R & D investment, China Meheco Group Co.Ltd(600056) R & D investment will reach US $33.5 billion in 2021, compared with us $11.9 billion in 2016, with a compound growth rate of 21.3% from 2016 to 2021. From the perspective of investment and financing of China’s medical and health industry, China’s total financing increased rapidly from 2011 to 2021, with a compound annual growth rate of 41.45%. It is expected that the year-on-year growth in 2021 will exceed 38%. In general, the prosperity of China’s drug safety assessment industry will continue to maintain a high level.
The company is a high-quality company in the field of drug safety assessment in China, opening a global layout. Founded in 1995, the company has a professional and technical team of more than 2000 people by the end of 2021, with subsidiaries in Beijing, Suzhou, Chongqing, Wuzhou, Guangzhou, Shanghai, California and Boston. The company’s business mainly includes drug safety evaluation, pharmacokinetics, pharmacology and pharmacodynamics research, in which drug safety evaluation is the core business of the company. According to Frost & Sullivan data, the company has become the largest contract research organization for non clinical safety evaluation of drugs in China, with a market share of 15.7% based on revenue in 2019. In terms of global layout, the company acquired biomere, an American preclinical cro company, with us $27.28 million in cash in December 2019. The total number of orders undertaken in 2020 was 160 million yuan, which boosted the number of overseas customers of the company to increase significantly, from 24 at the end of 2019 to 111 at the end of September 2020. In the first half of 2021, the parent company signed new overseas orders of about 73 million yuan, Year on year growth of more than 80%. The normalization of the company’s equity incentive can better realize the binding of the interests of employees and the interests of the company. From 2018 to 2020, the company implemented a large-scale equity incentive plan for senior management team and core technicians for three consecutive years, involving about 1200 people, so as to realize the binding of employees’ interests and the interests of the company.
The rapid development in the field of biological medicine + animal resource guarantee has promoted the certainty of the company’s future performance. Biological macromolecules account for a relatively high proportion of the company’s business. Projects in the field of macromolecules have rich experience and strong competitiveness. The data show that the growth rate of China’s biological drug ind is greater than that of chemical drugs. In the future, the company is expected to rely on biological drugs for rapid development. For animal resources, the company began to build an animal base in Wuzhou, Guangxi from November 2019. By the end of June 2021, the main project of the base has been completed. After it is put into use, it can raise about 10000 non-human primates. It is expected to improve the self-sufficiency rate of the company’s animal experimental models, effectively control costs, and provide guarantee for the growth of orders. GLP qualification is the moat of the company’s rapid growth. Cro enterprises engaged in drug safety evaluation services need to have GLP certification. The construction standard of GLP laboratory is high, difficult and long, and there are differences in GLP certification standards and processes in various countries. From 2017 to 2020, 28 contract research organizations in China obtained GLP certificates issued by the State Food and drug administration; OECD and FDA are more strict in the approval of GLP qualification. At present, there are only 14 laboratories that have passed the FDA review in China, Joinn Laboratories (China) Co.Ltd(603127) a total of two.
Profit forecast and rating:
We believe that the company’s performance will continue to maintain a high growth rate from 2022 to 2023. On the one hand, China’s drug safety evaluation market will continue to maintain a high boom, and the company is in a leading position in the industry, which will significantly benefit from industry dividends; On the other hand, the company is expanding in the upstream and downstream of the industrial chain and internationalization, and the new growth point of performance is clear. As of March 9, 2022, the closing price of the company is 106.15 yuan, with a total market value of 40.5 billion yuan. We expect the operating revenue of 20222023 to be 2.143 billion yuan and 3.034 billion yuan respectively, the net profit attributable to shareholders of listed companies to be 781 million yuan and 1.080 billion yuan respectively, and the corresponding EPS of 20222023 to be 2.05 yuan / share and 2.83 yuan / share respectively, The P / E ratio was 51.82 times and 37.48 times respectively. For the first time, give a “buy” rating.
Risk warning: policy risk; The production capacity is lower than expected; Exchange loss risk.
