\u3000\u30 Guangdong Tengen Industrial Group Co.Ltd(003003) 63 Porton Pharma Solutions Ltd(300363) )
Event overview
In order to match the rapid growth of pre clinical and early clinical (CRO) business development needs, boten plans to purchase 100% equity of Kaihui Pharmaceutical Co., Ltd. held by Shanghai Ruizhi Chemical Research Co., Ltd. in cash at the price of RMB 266 million. After the completion of this transaction, the company will hold 100% equity of Kaihui pharmaceutical, which will become a wholly-owned subsidiary of the company and be included in the scope of the company’s consolidated financial statements.
Acquire Kaihui pharmaceutical, improve cro production capacity and expand China’s business territory
As the main supplier of raw materials and intermediates for clinical research and development in Fengxian District, it is located in Shanghai in 2008, and is committed to providing clinical services for customers in the small pharmaceutical research and development zone. Kaihui pharmaceutical is currently in the state of shutdown due to the transformation of plant and facilities. As of November 30, 2021, Kaihui pharmaceutical has realized a revenue of 131 million yuan and a net profit loss of 84.21 million yuan.
Kaihui pharmaceutical has existing comprehensive laboratories, kilogram laboratories and pilot workshops, which can provide capacity guarantee for the company to further expand cro business; At the same time, Kaihui pharmaceutical will also form a linkage with the company’s Shanghai R & D center, which will help improve the switching efficiency of the company’s projects from R & D to production and form a synergy between research and production; In addition, as one of the earliest enterprises engaged in the R & D and production services of small molecule drugs in China, Kaihui pharmaceutical has a good customer base and project delivery experience, which is conducive to the company’s further expansion of Chinese business, so as to gradually promote the implementation of the company’s end-to-end comprehensive pharmaceutical service platform strategy.
“Capacity” + “order” two wheel drive ensures the company’s sustained high growth
Orders: the total amount of the two major orders for small molecule innovative drug cdmo signed by the company is US $898 million (equivalent to about 5.717 billion yuan, exchange rate of US $1 = 6.37 yuan). According to the agreement, most orders are mainly delivered in 2022. The total contract amount of a single order on hand disclosed at present has increased by 84% year-on-year in 2021, and the superposition of other cdmo project orders is expected to support the excellent performance in 2022.
In terms of production capacity: the company has increased capital expenditure. New production capacity plans will be implemented this year and next to support the rapid development of business. 1) Yuyang pharmaceutical: the production capacity of nearly 580m3 will be gradually released in 2022; 2) Changshou base: the expansion of workshop 301 was announced on February 10, 2022, with an estimated additional capacity of 142.6m3. It is planned to be put into operation in March 2023; 3) Yichun, Jiangxi: on March 2, 2022, it was announced to expand two new workshops, with an estimated additional capacity of 300m3. It is planned to be completed and put into operation by the end of 2023. According to the new capacity plan, we expect that by the end of 2023, the company’s capacity will increase by about 53% year-on-year in 2021.
Investment suggestion: it is estimated that the net profit attributable to the parent company from 2021 to 2023 will be 524 million yuan, 1237 million yuan and 1.403 billion yuan respectively, and the corresponding PE will be 95, 40 and 36 times respectively. Based on the company’s orders in hand and new production capacity, we believe that the company’s performance may continue a high growth trend, so we maintain the “recommended” rating.
Risk warning: the risk of performance falling short of expectations, new business investment risk and fixed asset investment risk.
