\u3000\u3 Shengda Resources Co.Ltd(000603) 259 Wuxi Apptec Co.Ltd(603259) )
Key investment points
Investment logic: 1) “follow the molecular” strategy combined with one-stop solution: the company has abundant long-term development momentum and obvious funnel effect. In addition to covid-19 in 20q1, the revenue has increased month on month for 16 consecutive quarters; From 2015 to 2021, the retention rate of the company’s top ten customers was 100%, with strong customer stickiness; 2) The company’s long tail strategy + talent advantages build a solid moat: the revenue contributed by long tail customers accounts for 72% of 2021h1. The bonus of Chinese engineers has brought global competitiveness to the company, and the number of employees far exceeds that of Chinese peers; 3) Five sectors jointly contribute to the outsourcing of aircraft carrier voyage: chemical business as the cornerstone engine: the revenue accounted for 61.6% in 2021; Rapid development of testing business: the compound growth rate from 2017 to 2021 was 34.1%; The synergy effect of biological business is obvious, reflecting strong customer stickiness: in 2020, the revenue of collaborative projects with chemical business accounted for 83% of biological business; ATU and ddsu focus on long-term development, which will be the main driving force for the company’s future performance.
Combined with the one-stop solution, “follow the molecular” strategy brings long-term performance development: 1): the funnel effect is obvious, and the commercialization project is accelerated: in 2021, the company’s chemical small molecule R & D service synthesized 310000 compounds, and a total of 732 new molecules were added in 2021, including 691 in preclinical and clinical phase I, 32 in clinical phase II and 2 in clinical phase III; 2) The company’s performance has reached record highs: in 2021, the company’s revenue was 22.9 billion yuan, with a year-on-year increase of 38.5%, and the net profit attributable to the parent was 5.1 billion yuan, with a year-on-year increase of 72.2%. As of 21q4, the company has maintained a month on month increase in revenue for the 16th consecutive quarter; 3) The company has strong customer stickiness: from 2015 to 2021, the retention rate of the company’s top ten customers was 100%.
The company’s long tail strategy + talent advantages build a solid moat: 1) there are a large number of long tail customers and strong outsourcing demand: in 2020, small pharmaceutical companies contributed 39.6% of the number of new drugs approved by FDA, and the outsourcing demand of small pharmaceutical companies is huge and urgent; 2) The long tail strategy has achieved remarkable results: from 2011 to 2021, the number of active customers has increased by about 3.8 times (1200 to 5700 +), and the revenue contributed by long tail customers accounts for 72% of 2021h1; 3) Obvious talent advantages and sufficient incentive mechanism: with the expansion of revenue scale, the number of employees of the company has increased from 14763 in 2017 to 34912 in 2021, with an annual compound growth rate of 24%. At the same time, the incentive mechanism is sufficient. Since listing, the company has conducted four equity incentives and plans to carry out Sai incentive plan.
The five sectors jointly contribute to the long-distance voyage of outsourced aircraft carriers, with strong short-term development certainty and abundant medium and long-term engines: 1) chemical business is the cornerstone engine of the company’s performance development: the compound growth rate in recent five years is 33%, and the revenue in 21 years is 14.09 billion yuan, with a year-on-year increase of 46.9%, accounting for 61.6% of the company’s total revenue. The revenue growth rate in 22 years is expected to nearly double compared with that in 21 years. We can use crdmo platform to capture the next business, Help long-term development; 2) The test business has the fastest long-term growth rate and obvious synergy effect: the compound growth rate of the sector in recent five years is 34.1%, and the revenue in 2021 is 4.53 billion yuan, with a year-on-year increase of 38.03%, accounting for 19.8%; 50% of the customers of the test business belong to the chemical sector at the same time, and more than 10% of the ind applications belong to the biological business; 3) The biological business contributes to the research and development of new drugs and enjoys the dividend of biological drug development: the compound growth rate in recent five years is 33.1%, and the revenue in 2021 is 1.99 billion yuan, with a year-on-year increase of 30.1%, accounting for 8.7%. In 2020, the revenue of collaborative projects with chemical business accounts for 83% of the biological business; 4) The third pharmaceutical Revolution (CGT) in the forward-looking layout of ATU business: it acquired the world-class platform oxgene, continued to expand production capacity, established a leading position, and served 11 phase III clinical projects, 8 phase II projects and 53 preclinical and clinical phase I projects; 5) Ddsu focuses on China’s business and builds a long-term flow inlet: it helps 30 ind declarations every year, and the success rate of enabled pipeline products is 1 / 3; Milestone + sales share brings considerable benefits: it is expected that the company will bring benefits equivalent to 0.5 new drugs each year in the long-term future.
Investment suggestion: as a leader in the pharmaceutical outsourcing industry, with the strategy of following molecules and long tail, the company’s performance has repeatedly reached new highs and strong customer stickiness. At the same time, the company has arranged ATU and ddsu business departments focusing on long-term development, which are expected to contribute outstanding performance in the future. It is estimated that the company’s revenue from 2022 to 2023 will be 38.2/45.6 billion yuan and the net profit attributable to the parent company will be 86.4/10.32 billion yuan. The company will be given a valuation of 40-45 times in 2022 and a reasonable share price range of 115.4-129.8 yuan. It will be covered for the first time and given a “buy” rating.
Risk warning: the covid-19 epidemic situation intensifies the risk, the customer order execution and market development are less than expected, and the international trade dispute intensifies the risk.
