\u3000\u3 Shengda Resources Co.Ltd(000603) 392 Beijing Wantai Biological Pharmacy Enterprise Co.Ltd(603392) )
Key investment points
Performance of the annual report: high growth of revenue and improvement of net profit margin
The company released its annual report for 2021, with revenue of 5.75 billion yuan and yoy144 million yuan in 2021 3%, realizing a net profit attributable to the parent company of 2.02 billion yuan and yoy198.1 billion yuan 6%, and the net interest rate in 2021 will reach 36.2%, yoy2.5% 4pct。 We think,
The company’s revenue and profit growth in 2021 is in line with our expectations.
Growth capacity: large single product volume of vaccine, IVD structure adjustment
① vaccine business: in 2021, the revenue was 3.36 billion yuan (accounting for 58.5%) and yoy288.5% 5%。 In terms of sales volume, medical institutions purchased 10.099 million divalent HPV vaccines and nearly 140000 recombinant hepatitis E vaccines in 2021. From the perspective of the contribution of the company’s revenue increment in 2021, the revenue increment of bivalent HPV vaccine accounted for 77.4%. We believe that the high growth comes from (1) the improvement of vaccination rate under the sinking of academic promotion and channels (“up to now, the products have been recruited and supplemented in all provinces, autonomous regions and municipalities directly under the central government, effectively covering about 2500 district and county CDCs and about 18000 community hospitals in China”), We estimate that the overall vaccination rate of HPV vaccine will be 6.5-7% in 2021, and there is still much room for improvement. (2) Release of new production capacity (according to the record of investor relations activities of the company in November 2021, “according to the public data of the Chinese people’s Procuratorate, the batch issuance volume of bivalent HPV vaccine in the first half of the year is basically the same as that in the whole year after the production began in may last year. Due to the approval of pre potted syringe packaging in April this year, the production scale of Xilin bottle packaging was enlarged in July, and the production capacity in the second half of the year has reached the design capacity of 30 million pieces / year”). (3) The contribution of government procurement in some regions is incremental, but we expect that the proportion is not high (according to the record of the company’s investor relations activities in November 2021, “at present, the proportion of government procurement is very small, mainly through the CDC market”). With more and more regions purchasing HPV vaccine, we expect that the proportion of this part is expected to increase. We expect that HPV vaccination will continue to increase from 2022 to 2024 (assuming that the cumulative vaccination rate in 2024 will reach about 23%), the proportion of bivalent HPV vaccine will continue to increase, and the compound growth rate of the company’s vaccine revenue from 2022 to 2024 will be 45-50%.
② IVD business: in 2021, the revenue was 2.34 billion yuan (accounting for 40.7%) and yoy 59%. We believe that the growth of the company’s business mainly came from diagnostic reagents (revenue increment contributed 61.4% of IVD revenue increment) and active raw materials (the proportion of this revenue in IVD revenue increased from 4.9% in 2020 to 16.1% in 2021, and revenue increment contributed 35.2% of IVD revenue increment). In terms of diagnostic reagents, we believe that part of the high growth in 2021 comes from the export of covid-19 antigen detection reagents (“63.82 million antigen detection reagents were exported to more than 20 countries such as Germany, Britain, Russia, Australia and Japan in 2021”), Chemiluminescence related reagents maintained steady growth (“during the reporting period, the company added new types of luminescence projects such as swelling label and hormone, enriched the product line and further improved the supporting system of luminescence projects”). We continue to be optimistic about the growth of the company’s IVD business under the international market development and the continuous approval of Chinese new products. Under China’s covid-19 antigen self-test policy, it is expected to contribute new revenue growth.
Profitability: the proportion of vaccine revenue increased, driving the improvement of net profit margin
According to the company’s 2021 annual report, the company’s gross profit margin increased by 4.56pct and net profit margin increased by 7.2pct in 2021. We believe that the improvement of the company’s profitability comes from the increase in the proportion of vaccine revenue (we expect the net profit margin of vaccine business to be higher than IVD business) and the increase in the gross profit margin of vaccine business (the year-on-year increase in the gross profit margin of epidemic seedling business is close to 3PCT, which may come from the decrease in the apportioned cost after the increase of production). Looking forward to 2022, we expect that the proportion of vaccine revenue is expected to further increase (we expect to increase by 10 PCT +), and the gross profit margin of vaccine business will remain stable. Due to the structural adjustment of IVD business (we expect that the proportion of covid-19 antigen detection business and diagnostic instrument business with relatively low gross profit margin will increase), the gross profit margin of IVD business will decline. On the whole, we expect that the overall profitability will still be improved in 2022.
Outlook: R & D pipeline promotion and continuous release of production capacity
The R & D pipeline continues to advance, the product echelon relay and the growth of large varieties: according to the company’s 2021 annual report, the progress objectives of the medium and short-term vaccine pipeline include the completion of phase III clinical registration of live attenuated varicella vaccine, the continuation of phase IIB clinical of varicella vzv-7d vaccine, the completion of phase III clinical and conditional listing of nasal covid-19 vaccine, the completion of process reproduction of 9-price HPV vaccine in the commercial workshop GSK cooperates to complete the delivery of materials required by phase III clinical trial workers and carry out clinical trials of 20 valent polysaccharide combined with pneumonia vaccine.
Continuous release of production capacity to support performance flexibility: according to the company’s 2021 annual report, Wantai Canghai phase II is expected to open the R & D building in April 2022; Vantage Carey diagnostic base project is expected to be completed in 2022; Tairun innovative drug production base plans to complete the completion acceptance, covid-19 vaccine workshop equipment verification and chickenpox vaccine workshop decoration in 2022; Changping plant will complete the construction procedures of nasal spray vaccine industrial base and start construction in 2022. In addition, the ending value of projects under construction in the 2021 annual report reached the highest value since 2015. We believe that with the implementation of fixed assets conversion, the production capacity is expected to be further released to support the sustainable and rapid growth of the company’s performance.
Profit forecast and valuation
We expect that the company’s EPS from 2022 to 2024 will be 5.47 yuan, 6.96 yuan and 8.49 yuan / share respectively, and the closing price on March 18, 2022 will be 50 times that of 2022. We believe that in the window period of divalent HPV production capacity release and vaccination rate improvement, the company’s traditional varicella vaccine, new varicella vaccine and nine valent HPV vaccine may be listed successively from 2023 to 2025, connecting with relatively high-speed growth. In terms of core competitiveness, the research center cooperated by the company in Xiamen University has competitive advantages in vaccine design based on structural biology and efficient gene engineering recombinant antigen expression system. We believe that we can give a valuation premium to the vaccine business. In the IVD sector, the company’s chemiluminescence business is booming and provides cash flow in traditional advantageous fields, which is expected to continue to benefit from the research advantages of the cooperative team in the antigen field. Comprehensively consider the company’s competitive advantage and industry status, and maintain the “overweight” rating.
Risk tips
The clinical promotion speed of vaccine was lower than expected; Risk of excessive price reduction of core varieties; Cooperation with Xiamen University in R & D transformation is less than expected risk; Risk of deterioration of IVD variety competition pattern.
