\u3000\u3 Shengda Resources Co.Ltd(000603) 259 Wuxi Apptec Co.Ltd(603259) )
Event overview
The company announced its 2021 annual report: the annual operating revenue was 22.9 billion yuan, a year-on-year increase of 38.5%; The adjusted net profit of non IFRS was 5.13 billion yuan, a year-on-year increase of 41.1%; The net profit attributable to the parent company was 5.1 billion yuan, a year-on-year increase of 72.2%; The non net profit deducted was 4.06 billion yuan, a year-on-year increase of 70.4%.
Analysis and judgment:
The performance growth is in line with market expectations and is expected to achieve a growth rate of 65% ~ 70% in 22 years
In 2021, the operating revenue was 22.9 billion yuan, with a year-on-year increase of 38.5%. After adjustment, the net profit of non IFRS was 5.13 billion yuan, with a year-on-year increase of 41.1%. The trend of rapid growth continued and the performance was in line with market expectations. Considering the year-on-year growth of 32.2% of the company’s employees in 2021 and the situation of orders on hand, it is expected to achieve a year-on-year growth of 65% ~ 70% in 2022. Considering China’s bottom dividend (Engineer dividend and production cost advantage) and the current low proportion of China’s CXO supply chain in the world, we still maintain the previous judgment that the CXO industry will continue to grow rapidly in the next 3-5 years. As a global CXO leading enterprise rooted in China, Wuxi Apptec Co.Ltd(603259) will continue to benefit from the high growth brought by the industry dividend. Considering the ultra-high growth of performance from January to February 2021 and the advantages of the company’s integrated services, looking forward to the future, as the world’s leading integrated service leader of “drug discovery + preclinical research + clinical business and cdmo business”, the company will continue to benefit from the high outlook of the industry and continue to show rapid growth.
The chemical business continues to contribute performance flexibility, and cgtcdmo is expected to resume rapid growth in 22 years
(1) the chemical business continues to contribute performance flexibility – the revenue growth rate is expected to double in 2022: the chemical business achieved an operating revenue of 14.09 billion yuan in 21 years, with a year-on-year increase of 46.9%, accounting for 61.5% of the overall revenue. It is expected to double the growth rate and achieve ultra-high growth in 2022 driven by long tail customers and commercial cdmo orders. Cdmo business achieved an operating revenue of 7.92 billion yuan (accounting for 34.6%), with a year-on-year increase of 49.9%. Based on the fact that the number of covered pipelines reached 1666 in 2021 (including 42 commercialized, 49 clinical phase III, 257 clinical phase II, 1318 preclinical and phase I), and with the continuous production of Changzhou, Taixing, Wuxi and other real estate, it is expected that the performance will continue to grow at an ultra-high speed in the next three years; The drug discovery business achieved an operating revenue of 6.17 billion yuan, a year-on-year increase of 43.2%, of which the revenue of long tail customers increased by 71% year-on-year. It is expected to continue the trend of rapid growth on the basis of engineer dividends in the next three years.
(2) cgtcdmo business capacity supply and the United States are expected to resume rapid growth in 2022: the company’s cgtcdmo business achieved an operating revenue of 1.03 billion yuan in 2021, a year-on-year decrease of 2.8%, of which the business in China increased by 87% year-on-year, and the business in the United States showed negative growth due to the delay and postponement of core commercialization projects. The company achieved a great increase in production capacity in 2021, of which the Shanghai Lingang Holdings Co.Ltd(600848) 15300 square meter process R & D and commercial production center was put into operation in October 2021, and the 13000 square meter base in Philadelphia was put into operation in November 2021. On the basis of expanding production capacity, the company continues to strengthen the capacity-building of cgtcdmo service platform, including optimizing plasmid and lentivirus vector processes and increasing the number of service pipelines from 38 in 2020 to 74 in 2021 (2021 pipeline is divided into stages: 11 phase III, 5 phase II, 58 preclinical and phase I). Looking forward to the future, considering that the company’s business in the United States is recovering well, it is expected that the business is expected to resume rapid growth in 2022.
(3) wuxitesting: laboratory analysis and testing services will continue to achieve coordinated development with clinical business, and it is expected to continue to grow at a high speed in 2022. Wuxitesting achieved an operating revenue of 4.53 billion yuan in 2021, with a year-on-year increase of 38.0%, of which the laboratory analysis and testing business achieved an operating revenue of 3.05 billion yuan, with a year-on-year increase of 38.9%. If excluding the medical device testing business, this business increased by 52% year-on-year, and the clinical cro and SMO business achieved an operating revenue of 1.48 billion yuan, with a year-on-year increase of 36.2%. Looking forward to the future, laboratory analysis and testing services will continue to achieve coordinated development with clinical business, and will continue to show rapid growth.
(4) wuxibiology: it will increase by 30% in 2021 and will continue the growth trend of recent years in 2022. In 2021, wuxibiology achieved an operating revenue of 1.99 billion yuan, with a year-on-year increase of 30.0%, of which the revenue related to macromolecular biological drugs and new technologies and new capabilities increased by 75% and the Del revenue increased by 42% year-on-year. Looking forward to the future, driven by the new business and new technology platform, it is expected to continue to achieve rapid growth.
(5) wuxiddsu: the business will be upgraded iteratively in 2022, and the revenue is expected to decline slightly. The company’s wuxiddsu business achieved an operating revenue of 1.25 billion yuan in 2021, with a year-on-year increase of 17.5%. It has completed 144 ind applications and 110 clinical trial approvals for customers, of which 70% of the projects are in the top three of innovative drugs in China. At present, the company’s ddsu project has one NDA stage, three clinical stages III, 14 clinical stages II and 74 clinical stages I. looking forward to the future, with the gradual emergence of commercial pipelines in the project, the sales commission will be realized one after another.
The gross profit margin is affected by factors such as labor costs and rising prices of raw materials, showing a slight downward trend
In 2021, the gross profit margin of the company’s main business was 36.27%, a year-on-year decrease of 1.70pct, and the adjusted non IFRS gross profit margin was 38.0%, a year-on-year decrease of 2.30pct. By business, the chemical business, biological business and cgtcdmo business decreased significantly. The decline of the company’s gross profit margin was mainly affected by labor costs, raw material costs and RMB appreciation. In 2021, the company’s labor costs increased by 44.77% and raw material costs increased by 49.70% year-on-year, significantly higher than the year-on-year growth rate of the overall main business of 38.52%. Looking ahead, we judge that with the embodiment of scale effect, the overall gross profit margin is expected to recover slightly.
Investment advice
As a “big and strong” platform innovative drug service provider, the company has global business competitiveness, and the management team with Li Ge as the leadership core has the foresight of business layout and the ability to expand business. We judge that the company is a rare target with medium and long-term growth of a shares. Considering the rhythm of order confirmation, slightly adjust the early-stage profit forecast, that is, the revenue in 22-23 years is adjusted from 38.482/48.485 billion yuan to 38.571/46.392/58.483 billion yuan in 22-24 years, and the EPS in 22-23 years is adjusted from 2.80/3.48 yuan to 2.92/3.68/4.58 yuan in 22-24 years, corresponding to the closing price of 110.38 yuan / share on March 23, 2022, and the PE is 37.80/29.96/24.10 times respectively, maintaining the “buy” rating.
Risk tips
The core technology backbone and management risk of loss, the risk of increased competition, growth strategy and business expansion risk of failure, core customer loss, exchange rate volatility risk, drug price reduction in the US market, and New Coronavirus epidemic affect the expansion of China’s external business.
