\u3000\u30 Guangdong Tengen Industrial Group Co.Ltd(003003) 63 Porton Pharma Solutions Ltd(300363) )
Event: the company issued the annual report of 2021. In 2021, the company achieved a revenue of 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%; The net profit deducted from non parent company was 503 million yuan, a year-on-year increase of + 74.42%. The company’s performance growth is in line with expectations.
API cdmo business: synergy is gradually emerging, production capacity is accelerated, and timely delivery of major orders is guaranteed. In 2021, the company’s API cdmo business achieved an operating revenue of 3.069 billion yuan, a year-on-year increase of + 51.00%. Among them, the revenue of API products was 290 million yuan, a year-on-year increase of + 55.00%; There are 13 collaborative projects of drug substance (DS) and preparation (DP), and the product upgrading and synergy effect are gradually emerging. During the reporting period, the company’s API cdmo business served 265 customers, with 76 new customers; 136 new projects were added, and the number of service projects reached 369, including 42, 10 and 79 projects in clinical phase III, new drug listing application and listing respectively, and 2 innovative drug projects were approved for listing; U.S. cro business platform J-star led 60 early projects for the company’s Chinese team, and 20 projects of API cdmo business services successfully entered the next development stage. The diversion effect of foreign and Chinese, front-end and back-end projects gradually appeared. In terms of capacity construction, in June 2021, 109 workshops in Changshou production base of the company were put into use, with a new capacity of 186m3; In September 2021, the company acquired 70% equity of Yuyang pharmaceutical, and the new capacity is about 584m3. After the transformation, this part of the capacity will be released in 2022. By the end of 2021, the company’s API cdmo service sector had a production capacity of about 2019m3, a year-on-year increase of + 65%. On February 11, 2022, the company signed a major contract with Pfizer’s companies with an amount of US $681 million, and the orders will be delivered centrally in 2022. The company’s rapidly increasing API cdmo capacity will help the timely delivery of major orders and drive the high growth of the company’s performance in 2022.
Strategic emerging business: drag down performance in the short term and open up the company’s growth space in the long term. In 2021, the company’s preparation cdmo business achieved a revenue of 20 million yuan and achieved a breakthrough of “from 0 to 1”; 24 customers were served and 23 new customers were added; There are 28 service projects, including 2 clinical phase III projects, 8 projects in the listing stage and 31 new projects introduced; Newly signed orders amounted to 71 million yuan (year-on-year + 274.37%). In addition, the phase I project of the preparation production base in Liangjiang New Area of Chongqing was completed in November 2021, and the main project is expected to be completed and put into operation in 2022q4. After the preparation production base is put into operation, the company will have the preparation production capacity of multi dosage form, multi specification and multi-stage, and further improve the end-to-end cdmo service platform layout of “API (DS) + Preparation (DP)”. During the reporting period, the cdmo business of gene cell therapy achieved a revenue of 14 million yuan, a year-on-year increase of + 897.00%; 17 customers were served and 15 new customers were added; There are 18 service projects, all in preclinical and clinical phase I stages, 27 new projects have been introduced, and new orders of 130 million yuan have been signed. The laboratory on the fourth floor of the gene cell therapy service platform project located in Sangtian Island, Suzhou has been completed and put into use, further strengthening the company’s gene therapy process development, analysis and detection capabilities. As it is still in the capacity-building period, the above two new businesses reduce the net profit of the company’s consolidated statements by about 106 million yuan, which will drag down the company’s performance in 2021, but in the long run, it will help to expand the company’s growth space.
Major orders began to be delivered, and the performance increased significantly in 2022q1. On the same day of issuing the 2021 annual report, the company issued the 2022q1 performance forecast. In 2022q1, the company expects to achieve a revenue of 1.357-1.466 billion yuan, a year-on-year increase of 150% – 170%; The net profit attributable to the parent company was RMB 326344 million, with a year-on-year increase of 270% – 290%; It is expected to realize a net profit of 324339 million yuan, a year-on-year increase of 330% – 350%. The performance of 2022q1 increased significantly year-on-year, mainly due to: (1) the cdmo industry maintained a high outlook, and the company continuously enriched its service customers and project pipelines; (2) Delivery of major orders received by the company in the early stage; (3) Affected by the product structure and scale effect, the net profit margin of the company in 2022q1 increased significantly to 23% – 24% (the net profit margin of the company in 2021 was 15.32%).
Profit forecast and investment suggestions: from 2022 to 2024, the company is expected to realize the parent company’s profit of 1.428/1.514/1.805 billion yuan, EPS of 2.62/2.78/3.32 yuan respectively, and the PE corresponding to the current stock price is 35.72/33.68/28.26 times respectively. Considering: (1) since the listing in 2014, the average and median of the company’s PE (TTM) are 70.88 and 68.09 times respectively; (2) Under the influence of the high base in 2022, the growth rate of the company’s performance is expected to slow down significantly from 2023 to 2024; (3) The PE of peer companies Wuxi Apptec Co.Ltd(603259) , Asymchem Laboratories (Tianjin) Co.Ltd(002821) in 2022 were 40.93 and 43.04 times respectively; Give the company 40-45 times PE in 2022, and the corresponding target price is 104.80-117.90 yuan / share. If it is covered for the first time, give the company a “recommended” rating.
Risk tips: covid-19 epidemic risk, increased industry competition risk, exchange rate change risk, Sino US trade friction risk, order growth less than expected risk, etc.
