\u3000\u3 China Vanke Co.Ltd(000002) 821 Asymchem Laboratories (Tianjin) Co.Ltd(002821) )
2021:7 accelerated verification, optimistic about the improvement of profitability in 2022
In 20211, the revenue was 4.639 billion yuan (yoy47.28%, excluding the exchange yoy56.13%), the net profit attributable to the parent company was 1.069 billion yuan (yoy48.08%), the net profit attributable to the parent company after deducting the non return was 935 million yuan (yoy45.22%), the income in the single quarter of 2004 was 1.716 billion yuan (yoy60.83%, excluding the exchange yoy66.61%), the net profit attributable to the parent company was 374 million yuan (yoy73.45%), and the net profit attributable to the parent company after deducting the non return was 339 million yuan (yoy80.88%), which was in line with our expectations. The net cash flow from operating activities was 113 million (yoy-80.12%), mainly due to the increase in the purchase of raw materials under large orders and the payment of new remuneration to employees.
Profitability: deducting non net interest rate of 23.05%, which decreased slightly year-on-year. The gross profit margin was 44.36% (down 2.21 PCT year-on-year). We found that it was mainly due to the impact of exchange + the decline of gross profit margin caused by the fluctuation of project structure in the clinical stage (the gross profit margin in the clinical stage decreased by 3.8 PCT year-on-year). We expect that with the confirmation of large orders for commercialization of high gross profit margin and the improvement of capacity utilization of new businesses in 2022, the gross profit margin is expected to increase significantly from 2022; Period expense rate: affected by the interest contribution, it decreased by 1.11pct year-on-year, and the sales expense rate and financial expense rate decreased by 0.5 and 1.24pct year-on-year respectively, which showed an obvious positive contribution to the decline of the overall period expense rate. We assume that the capital expenditure will accelerate in 2022. Taking into account the changes in gross profit margin and expense rate caused by business structure, we judge that the company’s net deduction interest rate is expected to rise steadily from 2022 to 24.
Order & capacity: US $1.898 billion in hand. We are optimistic about the acceleration of revenue in 2022 under the matching of capacity
Orders reached a record high: in 2021, the total amount of orders on hand was US $1.898 billion (yoy320%), and the inventory was 1.396 billion (a year-on-year increase of 142% over the added value at the beginning of the year). Among them, the on hand orders of clinical cro services exceeded 300 million yuan, and the on hand orders of biological macromolecular cdmo reached 130 million yuan, laying the foundation for high growth of emerging businesses in 2022. According to the company’s annual report, a total of $481 million of large orders signed in 2021 confirmed revenue of $1.231 billion. 9.3 billion orders signed in 2021 and 2022 are expected to be delivered successively, laying the foundation for further acceleration of the company’s revenue in 2022.
Capacity matching release: by the end of 2021, the volume of the company’s traditional batch reactor was nearly 4700m32022. At the end of 2022, the capacity of small molecule traditional batch reactor is planned to increase by 46% compared with the end of 2021, and 7126 people will be employed in 2021, with a year-on-year increase of 30%, laying a capacity foundation for large order delivery. In 2021, the fixed assets were 2.244 billion and the projects under construction were 1.047 billion. Considering the pace of the transformation of projects under construction into fixed assets, it means that there is still a strong guarantee for the release of new production capacity from 2022 to 2023. It is optimistic that the continuous release of production capacity will lay a foundation for high income growth.
Business: commercial cdmo continues to be realized, and is optimistic about funnel structure optimization and emerging business development
Business splitting: the revenue of small molecule cdmo is 4.238 billion (yoy45.63%). 1) The clinical revenue of small molecule is 1.723 billion (yoy37.58%), and the gross profit margin is 40.75% (down 8.46pct year-on-year). By reviewing the fluctuations of cdmo gross profit margin in the clinical stage in history, we expect that the decline of gross profit margin is mainly caused by the impact of exchange rate and the fluctuation of project structure, and there is still the possibility of fluctuation in the future. 2) The revenue of small molecule commercial cdmo is 2.515 billion (YoY 51.70%), and the gross profit margin is 47.59% (an increase of 2.31% year-on-year, which is expected to be related to the product structure and the strong large-scale effect of large orders). We expect that the high growth of commercial cdmo revenue is mainly related to the execution of large orders of a MNC. The annual report disclosed that 1.231 billion (US $481 million orders of a MNC) were confirmed in 2021. 3) The revenue of emerging business is 398 million (YoY 67.43%), and the gross profit margin is 39.58% (a year-on-year decrease of 2.05%. We expect it to be mainly related to the order structure).
It is expected that the commercial cdmo project will enter the cashing period and the funnel pool structure will continue to be optimized. 1) Commercial cdmo projects are expected to remain high. In 2021, 290 clinical projects (55 in phase III, with a year-on-year increase of 13) and 38 commercialized projects (with a year-on-year increase of 6) were recognized. Our judgment that the company entered the funnel effect cashing period in 2021 was verified. In addition, at the end of 2021, the company had more than 30 orders in China’s NDA stage. We expect that the number of new commercial projects of the company will remain high from 2022 to 2024. We continue to be optimistic about the realization of commercial projects and drive the high growth of revenue in the commercialization stage of the company. 2) The expansion of small and medium-sized customers has been continuously promoted, and the funnel pool structure has been continuously optimized. In February 2022, the company announced the acquisition of snapdragon and will build it into an overseas R & D platform. Through snapdragon’s existing base of major customers and small and medium-sized customers in Europe and America, the company will accelerate the development process of small and medium-sized customers, create a funnel pool of small and medium-sized customers, and drive the long-term growth of the company’s performance. To sum up, we believe that the small molecule cdmo funnel pool is expected to be further enriched from 2022 to 2025, laying the foundation for the medium and long-term performance growth of the company. 3) Hillhouse increased its capital Asymchem Laboratories (Tianjin) Co.Ltd(002821) biology, and the emerging business is expected to enter a period of rapid development. On March 25, it was announced that Gaoling will increase its capital Asymchem Laboratories (Tianjin) Co.Ltd(002821) biology, and become a global leader in cdmo of biological drugs and advanced therapies (including macromolecular drugs, antibody coupled drugs, cell gene therapy drugs and mRNA drugs). With reference to the development prospect of the industry and the capacity-building of emerging business technology, we are optimistic about the flexibility of emerging business.
To sum up: we believe that the small molecule cdmo commercialization project of the company has entered the fulfillment period (the new commercialization projects each year maintain a high absolute value), which will become the basic sector for high income growth from 2022 to 2025. We found that the company obtained the first commercial project order from “large pharmaceutical companies in Japan” in 2021. We believe that the development and fulfillment of emerging markets such as Japan may also enter the acceleration stage. Superimposed on the orders in hand and development trend of emerging business sectors, we are optimistic about the certainty of accelerating the compound growth rate of the company’s revenue end from 2022 to 2025.
Profit forecast and valuation
Considering that the volume of the company’s orders on hand exceeds our expectations, with reference to the disclosure in the company’s prospectus that the order delivery cycle is generally 6-12 months, we expect that most of the orders on hand are expected to be delivered in 2022, so we raise the profit forecast for 2022. We expect the company’s EPS to be 10.59, 11.10 and 11.75 yuan / share from 2022 to 2024. The closing price on March 30, 2022 corresponds to 35 times of PE in 2022 (34 times of PE in 2023), maintaining the “buy” rating.
Risk tips
The risk of declining prosperity of global innovative drug R & D investment, the risk of new business expansion falling short of expectations, competition risk, exchange risk, the risk of order delivery falling short of expectations, and the risk of new production capacity falling short of expectations.
