\u3000\u3 Guocheng Mining Co.Ltd(000688) 356 Jenkem Technology Co.Ltd(688356) )
Key investment points
Financial performance: two wheel drive outside China, net profit margin increased
The company released its annual report for 2021, with a revenue of 351 million yuan, a year-on-year increase of 88.2%; The net profit attributable to the parent company was 176 million yuan, a year-on-year increase of 105.2%; The net interest rate attributable to the parent company was 50.1%, with a year-on-year increase of 4.14pct. Business segment analysis: in 2021, the company's product sales revenue was 300 million yuan (accounting for 86.6%), with a year-on-year increase of 85.5%; The income from technology royalties was 47 million yuan (accounting for 13.3%), with a year-on-year increase of 112.5%. From the perspective of sub regions, driven by growth, the company's revenue in China in 2021 was 165 million yuan (accounting for 47%), an increase of 79.4% year-on-year; The income of foreign regions was 186 million yuan (accounting for 52.9%), with a year-on-year increase of 96.7%. We believe that under the background of large-scale commercialization, clinical promotion and increase in the number of projects of drugs and devices outside China, the company's revenue and profit will increase significantly in 2021.
Marginal change: capacity release, project expansion, and growth is still in the fast lane
① capacity release: according to the company's 2021 annual report, the company's construction in progress / total assets at the end of 2021 was about 7.8%, significantly higher than the proportion at the end of 2020 (about 0.1%); According to the detailed balance sheet, among the 164 million construction in progress budget projects, the completion rate of 150 million budget projects is 57.4%, and that of other projects is 100%. In the main body of the annual report, it is mentioned that the capacity under construction of Liaoning Jiankai is 12-20 tons and the expected completion time is 2022. Considering the relatively high capacity utilization rate of the company (97.9%), we expect that with the release of new capacity in main production plants and the increase of the company's project capacity, it is expected to support the expansion of the company's peg materials in new fields. In addition, we are also concerned that after excluding the impact of share based payment in China, "the gross profit margin of product sales was 79.77%, an increase of 1.72 percentage points over the previous year, mainly due to the reduction of unit cost caused by the company's production scale effect". We believe that with the release of the company's new production capacity in Tianjin and Panjin and the further improvement of production scale effect, the overall gross profit margin still has room to improve. However, at the same time, we assume that the year-on-year growth rate of mRNA related material sales revenue slows down from 2023 to 2024, the proportion of Chinese project revenue increases slightly, and the overall gross profit margin of the company is basically the same (the gross profit margin of Chinese projects is lower than that of foreign projects).
② project expansion: according to the 2021 annual report of the company, "The company has more than 20 customers applying for clinical trials of polyethylene glycol modified drugs or polyethylene glycol medical devices in China, accounting for about two-thirds of all the R & D enterprises of polyethylene glycol modified drugs that have applied for clinical trials in China; in the field of international pharmaceutical application of polyethylene glycol derivatives, the company has deeply participated in the competition in the international mainstream market as a major emerging participant. The company supports three medical device products listed in overseas markets, 1 It also supports nearly 30 overseas innovative drug companies and biotechnology companies in the clinical stage or near the clinical stage of new drug varieties and more than 10 varieties of medical devices in the clinical stage. We believe that the company's relatively high proportion of Chinese cooperation projects and the rapid growth of the number of overseas projects can verify the company's technical ability and comparative advantage from the side. The company's 2021 annual report shows a significant increase in inventory, of which inventory commodities account for 44.4%. We believe that with the acceleration of inventory commodity delivery and finished product turnover, it is expected to support the growth of the company's medium and short-term performance.
Investment advice
We expect that the company's EPS from 2022 to 2024 will be 4.00 yuan, 5.33 yuan and 7.05 yuan / share respectively, and the closing price on March 30, 2022 corresponds to 49 times of PE in 2022. We believe that the core of PEG modification is niche customized processing track, which has the characteristics of innovative drug research and development; Based on the accumulation of PEG modification technology, the company is expected to continue to benefit from the dividend in the Chinese market + the listing of overseas varieties, and its own innovative drug R & D and PEG modification industry expansion are expected to provide additional increment and catalyst; The company is in the window period of income structure and business model adjustment, and the income elasticity is expected to exceed expectations. Taking into account the company's competitive advantage, development stage and valuation level, maintain the "overweight" rating.
Risk tips
Excessive R & D investment in core projects or risk of clinical failure; Risk of core project termination; Order delivery volatility risk; Production safety accidents and quality risks; Exchange rate fluctuation risk.
