\u3000\u30 Guangdong Tengen Industrial Group Co.Ltd(003003) 47 Hangzhou Tigermed Consulting Co.Ltd(300347) )
Event: the company issued the annual report of 2021. In 2021, the company achieved 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%. Looking at 2021q4 alone, the company achieved a revenue of 1.819 billion yuan, a year-on-year increase of + 103.91% and a month on month increase of + 35.85%; The net profit deducted from non parent company was 363 million yuan, a year-on-year increase of + 72.17% and a month on month increase of + 11.20%. During the reporting period, the company generated non recurring profits and losses of 1.643 billion yuan, mainly due to the income from changes in the fair value of financial assets recognized by the company in accordance with the new standards for financial instruments and the income from equity transfer.
The weakening impact of the epidemic, the increased demand for covid-19 prevention and treatment clinical trials and the good growth of emerging businesses have driven the rapid growth of the company’s revenue. In terms of business, the company’s clinical trial technical service revenue was 2.994 billion yuan, a year-on-year increase of + 97.05%, mainly due to the recovery of the demand for clinical trials affected by the epidemic in the early stage, the increase of the demand for multi regional clinical trials including covid-19 pneumonia prevention and treatment trial, and the good growth of emerging businesses such as pharmacovigilance and medical translation. By the end of 2021, the company had 567 ongoing drug clinical research projects, with a year-on-year increase of + 45.76%; The year-on-year growth of newly signed ind projects in registration transactions was + 59.00%, and the year-on-year growth of newly signed fdaid projects was + 417.00%. The company’s revenue from clinical trial related services and laboratory services was 2.194 billion yuan, a year-on-year increase of + 32.39%, mainly due to the increase in revenue from laboratory services, on-site management and subject recruitment services, as well as data management and statistical analysis services. By the end of 2021, the company had 2516 laboratory service projects and 1432 field management projects respectively, with a year-on-year increase of + 24.00% and + 21.36%. The number of customers of data management and statistical analysis services was 163, with a year-on-year increase of + 40.52%.
Multi regional clinical trial projects are growing rapidly, and the global service capacity is constantly improving. In 2021, affected by the increase of overseas clinical demand, the company’s overseas business realized a revenue of 2.447 billion yuan, a year-on-year increase of + 91.87%. By the end of 2021, the number of single regional and international multi center clinical trials being carried out overseas by the company was 132 and 50 respectively, an increase of 38.95% and 150.00% over the end of 2020; The number of overseas employees reached 1026, a year-on-year increase of + 32.90%. During the reporting period, the company took the lead in participating in the international multicenter phase III clinical study of Cansino Biologics Inc(688185) covid-19 vaccine Providencia (Ad5 ncov), and recruited more than 40000 subjects from Pakistan, Mexico, Russia, Chile and Argentina. Looking forward to the future, the company is expected to further improve the ability of global project implementation and management and overseas registration affairs and accelerate the international business expansion of the company with the help of covid-19 vaccine and therapeutic drug related international multi center clinical trials.
The financial expense rate decreased significantly, driving the year-on-year increase of non net interest rate. In terms of gross profit margin, the company’s gross profit margin decreased by 3.88pct to 43.55% year-on-year, mainly due to: (1) higher handling fees for multi regional clinical trials including covid-19 pneumonia related trials; (2) affected by exchange rate fluctuations, the gross profit margin of data management and statistical analysis services decreased year-on-year; (3) In the early stage, the proportion of on-site management business income greatly affected by covid-19 epidemic and low gross profit margin increased. In terms of expense rate during the period, affected by the expansion of revenue scale, the company’s sales expense rate and management expense rate decreased by 0.55 and 2.58pct year-on-year. Due to the increase of interest income of H-share raised funds, the company’s financial expense rate decreased by 6.91pct to – 4.15% year-on-year. Affected by the significant decline in the expense rate during the period, the company’s non net profit margin increased by 1.44pct to 23.62% year-on-year.
New orders grew well and there were sufficient orders on hand. In 2021, the company’s new contract amount was 9.645 billion yuan, a year-on-year increase of + 74.22%. By the end of 2021, the cumulative amount of contracts to be executed by the company had reached 11.405 billion yuan, a year-on-year increase of + 57.09%. On March 10, the main business data from January to February 2022 announced by the company showed that from January to February 2022, the newly signed orders of the company increased by more than 65.00% year-on-year. On the whole, the newly signed orders of the company are good, the orders on hand are sufficient, and the high growth of medium and short-term performance is guaranteed.
Launch talent incentive plan to ensure the long-term development of the company. On March 28, 2022, the company issued the 2022 A-share employee stock ownership plan (Draft), which plans to establish an employee stock ownership plan for no more than 782 participants. The total amount of funds to be raised is no more than 266 million yuan, and the number of shares involved is no more than 3608100 shares, accounting for about 0.4136% of the current total share capital of the company. The stock transfer price is 73.80 yuan / share (the latest closing price of the company is 98.60 yuan / share). On the same day, the company issued the 2022 H-share appreciation right incentive plan (Draft), which plans to grant no more than 449900 H-share appreciation rights to less than 90 incentive objects of overseas subsidiaries. The performance assessment objectives of the two incentive plans are: Based on the deduction of non net profit in 2021, the net profit growth rate from 2022 to 2024 will not be less than 40%, 75% and 105%, that is, the net profit will not be less than RMB 1.724 billion, 2.155 billion and 2.525 billion, with a year-on-year increase of 40.00%, 25.00% and 17.14%.
Profit forecast and investment suggestions: from 2022 to 2024, the company is expected to realize the parent company profit of 3.466/4.076/4.704 billion yuan, EPS of 3.97/4.67/5.39 yuan respectively, and the PE corresponding to the current stock price is 25.83/21.97/19.04 times respectively. In terms of company valuation, due to the large amount of non recurring profits and losses generated by the company’s equity investment (1.643 billion yuan of non recurring profits and losses in 2021) and high uncertainty, we split the company’s business into investment business and clinical cro’s main business for valuation. As for the investment business, by the end of 2021, the book balance of the company’s other non current financial assets and long-term equity investment was 8.746 billion yuan and 739 million yuan respectively. Considering the current poor performance of the secondary market and primary market financing of pharmaceutical and biological enterprises, based on the principle of prudence, we take the book balance as the valuation of the company’s investment business, that is, the corresponding valuation of the investment business is 9.485 billion yuan. The main business of clinical cro is expected to achieve a net profit of RMB 1.772 billion deducted from non parent company in 2022, with a year-on-year increase of 43.84%. Referring to the performance growth of the company and the valuation of peer companies, the clinical cro business is given 50-55 times PE in 2022, and the corresponding valuation of this business is RMB 88.6-97.5 billion. Overall, the reasonable valuation of the company in 2022 is 98.1-106.9 billion yuan, and the corresponding target price is 112.48-122.64 yuan / share, maintaining the “recommended” rating of the company.
Risk tips: covid-19 epidemic risk, industry policy risk, exchange rate change risk, order growth less than expected risk, brain drain risk, etc.
