\u3000\u30 Guangdong Tengen Industrial Group Co.Ltd(003003) 63 Porton Pharma Solutions Ltd(300363) )
Event overview
The company announced the 2021 annual report and the performance forecast for the first quarter of 2022: the annual operating revenue in 2021 was 3.105 billion yuan, a year-on-year increase of 49.87%, the net profit attributable to the parent company was 524 million yuan, a year-on-year increase of 61.49%, and the net profit deducted from non net profit was 503 million yuan, a year-on-year increase of 74.42%. In the first quarter of 2022, the operating revenue was 1.357 ~ 1.466 billion yuan, with a year-on-year increase of 150% ~ 170%, the net profit attributable to the parent was 326 ~ 344 million yuan, with a year-on-year increase of 270% ~ 290%, and the net profit deducted was 324 ~ 339 million yuan, with a year-on-year increase of 330% ~ 350%.
Analysis and judgment
The main business has been cashed in at a high speed, and the profitability of 22q1 has been significantly improved
The operating revenue of the company in 2021q4 and 2022q1 was 1.075 billion yuan and 1.357 ~ 1.466 billion yuan respectively, with a year-on-year increase of 84.2% and 150.0% ~ 170.0% respectively. The performance growth trend has been significantly accelerated. We are mainly affected by the following factors: the continuous fulfillment of major contract orders, the continuous improvement of supply side capacity (number of employees, production capacity and laboratory area), and the gradual improvement of pipeline coverage. The company's net profit margin (median) attributable to the parent company in Q1 2022 was 23.7%, showing a significant increase trend compared with 16.2% in Q1 2021. We judge that it is mainly affected by two factors, namely, the high net profit margin of covid-19 related businesses and the increase in net profit margin caused by the improvement of overall capacity utilization. Considering the successive fulfillment of major contract orders and the continuous growth of pipelines and production capacity, we judge that we will continue to achieve ultra-high growth in 2022.
(1) continuous fulfillment of major contracts and orders: the company signed major contracts and orders of US $217 million and US $681 million on November 30, 2021 and February 11, 2022 respectively, of which 316 million yuan of revenue was recognized in 2021. We judge that most of the major contracts and orders will be recognized in 2022 and significantly increase the performance in 2022.
(2) continuous improvement of supply side capacity (number of employees, production capacity and laboratory area): by the end of 2021, the scale of the company's R & D team was 1201, a year-on-year increase of 68.2%; The company's API production capacity was accompanied by the production of 109 workshops (186 m3) in the first half of 2021 and the acquisition of Hubei Yuyang (584 m3) in 2021q3. The total production capacity was about 2019 m3, with a year-on-year increase of about 65%; The company's laboratory area exceeded 29000 square meters, with a year-on-year increase of 45.0%. Looking forward to the future, with the continuous production of Shanghai new R & D center, workshop 301, DONGBANG phase II production capacity and Shanghai Kaihui to be acquired, it will lay a foundation for the rapid growth of the company's future performance.
(3) continue to improve the breadth and depth of customer coverage and expand customer pipeline: in 2021, the company added 113 customers and served 600 customers in total, so as to improve the breadth and depth of customer coverage. In 2021, the total number of service items of the company (including only the items sold during the reporting period, excluding J-star) was 410, with a year-on-year increase of 14%, of which 209 were in preclinical and clinical phase I, 65 were in clinical phase II, 44 were in clinical phase III, 10 were in the application stage of new drug listing, and 87 were in the listing stage. With the strategic transformation to cdmo mode since 2017, the diversion effect of the company's API projects is gradually reflected. For example, 20 projects served in 2021 enter the next stage and 2 innovative drug projects enter the commercialization stage.
The expansion of new businesses (cgtcdmo business and preparation cdmo business) continues to accelerate, contributing flexibility to future performance growth
(1) cgtcdmo business: business capacity building continues to accelerate. Suzhou boten biology, the company's cdmo business entity of gene cell therapy, continues to build cdmo platforms such as plasmid, cell therapy, gene therapy, oncolytic virus, nucleic acid therapy and live bacterial therapy, providing end-to-end services from database building, process method and analysis method development, cGMP production to preparation filling. By the end of 2021, the number of employees of Suzhou boten biology reached 294, with a year-on-year increase of 216%. In the second half of 2021, the company's laboratory in Sangtian island was officially put into use. The company expects that the production workshops in Q4 Suzhou Sangtian island will be put into use in 2022, greatly expanding the company's capacity supply. In 2021, the company introduced 27 new projects and signed new orders of about 130 million yuan, realizing an operating revenue of 13.87 million yuan and a net profit of - 126 million yuan. Looking forward to the next three years, with the continuous strengthening of business capacity and the continuous improvement of production capacity, we judge that Suzhou boten biology will show ultra-high growth.
(2) preparation cdmo business: achieve a breakthrough of "0". In May 2021, the company launched the phase I project of preparation production base in Liangjiang New Area of Chongqing. It is expected that Q4 will be completed and put into operation in 2022. After the new production capacity is put into operation, the company will have the production capacity of multiple dosage forms and specifications such as Gaohuo, oral solid preparations and injections, so as to promote the implementation of the company's integrated platform capacity layout of "DS + DP". By the end of 2021, the company achieved a "0" breakthrough in the preparation cdmo business, with an operating revenue of RMB 2016 million, a year-on-year increase of 164%, the number of research projects reached 31, and the scale of newly signed orders was RMB 71.13 million (including 15 innovative drugs and 16 generic drugs). It is expected that the preparation cdmo business will continue to achieve explosive growth with the improvement of business capacity and the continuous production of new production capacity in the future.
The gross profit margin is relatively stable as a whole, and the improvement of capacity utilization hedges the negative impact of the rise in labor costs, raw material costs and the initial investment of new businesses
The gross profit margin and net profit margin of the company in 2021 are 41.36% and 15.32% respectively, which is relatively stable compared with 2020
(1) the gross profit margin of chemical CMO & cro business continues to show an upward trend due to the improvement of capacity utilization. The overall gross profit margin of chemical CMO & cro of the company was 42.96%, with a year-on-year increase of 0.78pct, of which the gross profit margin of CMO business was 42.02%, with a year-on-year increase of 1.27pct, and the gross profit margin of cro business was 48.07%, with a year-on-year increase of 3.74%. In 2021, the overall comprehensive capacity coverage reached 72%, which continued to rise compared with 70% in 2020. Compared with the impact of hedging exchange rate factors, labor costs (a year-on-year increase of 62.81%) & direct materials (a year-on-year increase of 60.34%), looking forward to the future, without considering the disturbance of major contracts, we judged that the profitability of the company is expected to achieve a relatively stable increase.
(2) other businesses (including cgtcdmo business and preparation cdmo business) are in the initial stage of investment due to the new business, and the overall gross profit margin shows a phased decline. The gross profit margin of other businesses of the company is - 42.67%, which is significantly lower than 39.14% in 2020. We judge that it is mainly affected by the early outbreak of cgtcdmo business and preparation cdmo business and the sharp rise of dislocation such as labor costs.
Investment advice
Considering the rhythm of confirmation of major contracts and the continuous growth of the number of covered pipelines, the performance expectation for 22-23 years was raised, that is, the revenue was adjusted from 6.878/7.706 billion yuan in 22-23 years to 7.100/79.00/8.300 billion yuan in 22-24 years, and the EPS was adjusted from 2.25/2.56 yuan in 22-23 years to 2.68/3.10/3.33 yuan, corresponding to the closing price of 93.72 yuan / share on March 25, 2022, and the PE was 35.02/30.24/28.15 times respectively, maintaining the "buy" rating.
Risk tips
Orders and revenue growth were lower than expected; The gross profit margin and net profit margin cannot be continuously improved.
