\u3000\u30 Guangdong Tengen Industrial Group Co.Ltd(003003) 63 Porton Pharma Solutions Ltd(300363) )
Matters:
(1) the company released its annual report for 2021, with a revenue of 3.105 billion yuan (+ 49.87%), and a net profit of 503 million yuan (+ 74.42%) after deduction, which is consistent with the express report previously released. Dividend plan: distribute cash of 1.93 yuan (including tax) for every 10 shares.
(2) the company issued the 2022q1 notice, realizing revenue of 1.357-1.466 billion yuan (+ 150% – 170%), and net profit attributable to non deduction of 324339 million yuan (+ 330% – 350%). Ideal performance.
Safe view:
Excellent performance in 2021, efficiency improvement + structure upgrading + scale effect to improve profitability
The company’s revenue increased quarter by quarter in 2021. In 2021q4, the revenue was 1.075 billion yuan (+ 84.20%), and the net profit deducted from non attribution was 150 million yuan (+ 118.67%). In the whole year, the revenue of late clinical and commercial business was 2.039 billion yuan (+ 40.69%), and the revenue of early clinical business was 973 million yuan (+ 72.35%). The faster growth of early business indicates the further expansion of the company’s “product funnel”, laying a foundation for medium and long-term growth.
In terms of gross profit margin, the gross profit margin of the company’s late clinical and commercial business is 42.02% (+ 1.27pp), and the gross profit margin of early clinical business is 48.07% (+ 3.74pp). Efficiency improvement + increased proportion of high value-added projects promoted the continuous improvement of gross profit margin. The comprehensive gross profit margin of the company in 2021q4 was 36.93%, which decreased month on month, mainly due to the partial fixed assets transfer of Sangtian Island R & D and production center of CGT business and the settlement of related projects with low gross profit margin. The impact will subside with the improvement of the utilization rate of Sangtian island base. Under the overall scale effect, except for the R & D expense rate (8.50%, + 0.88pp), the expense rate of the company decreased in other periods. Based on the above factors, the profitability of the company was further enhanced. During the reporting period, the two emerging businesses of CGT and preparation of the company were still in operation, and the consolidated net profit decreased by 106 million yuan.
Each section has achieved rapid development, and the synergistic effect appears
The company’s core business, small molecule cdmo, realized a revenue of 3.069 billion yuan (+ 51%), of which J-star 2.5% 300 million yuan (+ 8%), 290 million yuan (+ 55%) of API business, 369 (+ 10) revenue projects; CGT cdmo achieved a revenue of 13.87 million yuan, introduced 27 new projects and signed 130 million yuan of new orders throughout the year; Cdmo of preparations achieved a revenue of 2016 million yuan, 31 new projects were introduced throughout the year, and 71.13 million yuan of new orders were signed.
Integrated development brings synergy to the company’s business. In 2021, J-star channeled 60 projects (mainly from biotech in North America) for the Chinese team, and realized 13 collaborative service projects of API + preparation. Boten initially showed the comprehensive advantages of CXO.
Increase investment in construction to ensure the sustainability of high growth
The company has entered the accelerated construction period since 2021. Landing and new capacity continued to increase.
In 2021, 109 workshops were put into operation + Yuyang acquisition. By the end of 2021, the company’s small molecule production capacity was about 2019 cubic meters (+ 65%); At the end of the year, some laboratories of boten biological Sangtian island base were opened and added with AAV process capacity; Shanghai R & D center and Chongqing water and soil R & D center were opened in January and August 2021 respectively to support small molecule and preparation business.
Looking forward to 2022, the capacity of Yuyang will be further expanded after reconstruction; The remaining area of Sangtian island base will be put into operation before the end of 2022; Phase 1 of Chongqing preparation base will be put into operation in 2022q4; Shanghai Minhang R & D center is expected to be completed in 2022q4, and Kaihui pharmaceutical is also expected to complete the reconstruction and put into use within this year. Correspondingly, the company’s capex is expected to reach 1.7 billion yuan in 2022 (it is estimated to be about 600 million yuan in 2021, excluding mergers and acquisitions). In the next two years, the company will obtain a large amount of production capacity to support sustainable development.
Q1 has a brilliant performance, and large orders promote the company to a higher level
The company achieved revenue of 1.357-1.466 billion yuan in 2022q1, and it is expected that the large orders signed previously contributed revenue of 800900 million yuan. Large orders can reduce the decline of reactor utilization caused by project switching, and have limited cost improvement, driving the company’s profit margin to rise further. On the other hand, the income brought by the large order is by no means limited to the current profit itself. As one of the important suppliers of the project, the company’s industry reputation and capacity expansion speed have been improved by leaps and bounds, further widening the gap between industry echelons.
Maintain a “recommended” rating. We continue to be optimistic about the continuous growth ability of CXO industry and the company. After undertaking large orders and accelerating expansion, the company’s industry position has been further strengthened. Based on the latest capacity investment and landing rhythm of the company, adjust and add EPS forecast of 2.62, 2.97 and 3.73 yuan from 2022 to 2024 (originally predicted to be 2.24 and 2.58 yuan from 2022 to 2023), and maintain the “recommended” rating.
Risk tips: 1) if the investment and outsourcing ratio of global innovative drugs is lower than expected, it will affect the development of CMO industry; 2) The failure of drug research and development, the early termination of the project, or the sales of drugs after listing are less than expected, which may lead to the failure of large-scale production of corresponding orders; 3) Production accidents and warning letters from regulatory authorities may lead to the loss of orders and even customers; 4) Exchange rate fluctuations may cause exchange losses.
