\u3000\u30 Guangdong Tengen Industrial Group Co.Ltd(003003) 47 Hangzhou Tigermed Consulting Co.Ltd(300347) )
Key investment points
Event: 1) on March 28, 2022, the company released its annual report for 2021. In 2021, the company realized an operating revenue of 5.214 billion yuan, a year-on-year increase of 63.32%; The net profit attributable to the parent company was 2.874 billion yuan, a year-on-year increase of 64.26%; The net profit deducted from non parent company was 1.232 billion yuan, with a year-on-year increase of 73.90%; After adjustment, the net profit attributable to the parent company of non IFRS was 1.585 billion yuan, a year-on-year increase of 60.59%. 2) The company issued the draft restricted stock incentive plan for 2022, which plans to grant no more than 3608100 restricted shares to core managers, middle-level and technical backbone, grass-roots and technical personnel, with the grant price of 73.80 yuan / share.
After adjustment, the net profit attributable to the parent company performed brilliantly, the newly signed orders increased rapidly, and the main business accelerated the recovery. Quarter by quarter, the revenue of 2021q4 was 1.819 billion yuan (+ 103.91%), the net profit attributable to the parent company was 1.093 billion yuan (+ 153.18%), and the non net profit deducted was 363 million yuan (+ 72.19%). In 2021, the non recurring profit and loss was 1.643 billion yuan (+ 57.7%), resulting in the growth rate of net profit attributable to parent company being lower than that of non deduction. In 2021, the company’s overall gross profit margin was 43.38% (- 3.86pp). We expect that it is mainly due to the increase of handling fees of covid-19 clinical trial project and the rapid increase of cost side caused by the acceleration of personnel expansion. In 2021, the deduction of non net interest rate is 23.62% (+ 1.44pp). We expect that it is mainly due to the significant reduction of financial expenses caused by the increase of interest income of H-share raised funds. In 2021, the company’s employees accelerated to 8326 (+ 38.03%), and about 626000 yuan / person (+ 18.3%) in 2021. In terms of orders, new orders in 2021 were about 9.645 billion yuan (+ 74.22%), and by the end of 2021, the company had accumulated 11.405 billion yuan (+ 57.09%) of contracts to be executed, showing an accelerated growth trend.
Equity incentive is bound to the core backbone to lay a solid foundation for the medium and long-term rapid development of the company. The incentive objects granted by this incentive plan include core managers, middle-level managers and technical backbones, as well as grass-roots managers and technical personnel, with a total of no more than 782 people. The company’s performance assessment target is that the net profit from 2022 to 2024 is based on 2021, with growth rates of no less than 40%, 75% and 105% respectively, and the compound growth rate from 2021 to 2024 is about 27.0%, demonstrating the company’s confidence in sustainable and steady development. The company deeply binds the interests of core employees through equity incentive, which is expected to provide a pragmatic basis for the company’s long-term development.
Large clinical + clinical and laboratory related services are driven by two wheels, and the globalization strategy continues to be promoted. 1) Clinical trial technical services: the revenue is 2.994 billion yuan (+ 97.05%), and the gross profit margin is 44.77% (- 5.36pp), of which the total number of clinical projects is about 567 (+ 45.8%), and the number of phase I and phase II clinical projects increases rapidly, reaching 231 (+ 54.0%) and 106 (+ 60.6%) respectively. In terms of regional division, in 2021, there were 385 single clinical projects (+ 40.5%), 132 overseas single clinical projects (+ 38.9%) and 50 international multi center pilot projects (+ 150.0%).
2) clinical and laboratory related services: the revenue is 2.194 billion yuan (+ 32.39%), and the gross profit margin is 41.48% (- 3.11pp). ① Data management and statistical analysis services: in 2021, the number of customers rose to 163 (+ 40.5%), and the number of projects under implementation rose to 743 (+ 11.7%); ② Clinical trial site management and recruitment service (SMO): the number of projects under implementation rose to 1432 (+ 21.4%). ③ Fangda pharmaceutical: in 2021, it achieved a revenue of US $184 million (+ 46.6%), an adjusted net profit of US $32.2 million (+ 58.6%), and continued to expand its production capacity through mergers and acquisitions and self construction.
Profit forecast and Valuation: considering the continuous high growth of the company’s orders and consolidating the certainty of performance, we expect the company’s operating revenue to be RMB 7.040, 9.268 and 11.860 billion from 2022 to 2024 (the predicted value before 20222023 is about RMB 5.636 and 7.240 billion), with a year-on-year increase of 35.04%, 31.64% and 27.97%; The net profit attributable to the parent company was RMB 4.026 billion, RMB 5.069 billion and RMB 6.199 billion respectively (the predicted value before 20222023 was about RMB 3.335 billion and RMB 3.838 billion), with a year-on-year increase of 40.08%, 25.89% and 22.30%. The company is the leader of clinical cro in China, with prominent competitive advantages. The industry has ushered in a golden period of development and maintained the “buy” rating.
Risk warning events: the public materials used in the research report may have the risk of information lag or untimely update; Risk of loss of core technical personnel; Risk of industry R & D investment falling short of expectations; The risk that overseas business integration does not meet expectations; The risk of intensified industry competition; Exchange rate fluctuation risk.
