\u3000\u3 Guocheng Mining Co.Ltd(000688) 105 Nanjing Vazyme Biotech Co.Ltd(688105) )
Key investment points
Based on the advantages of core raw materials, integrated expansion to build a domestic alternative leader in biological reagents
The company takes the key core raw materials – enzymes, antigens and antibodies – as the center, focuses on the in vitro diagnostic products and biomedical services with high correlation with raw material radiation, expands the business model of driving revenue growth in the three application scenarios of “Life Science + in vitro diagnosis + biomedicine”, maintains a relatively leading advantage in the domestic competition pattern, and is expected to achieve year-on-year sustainable and rapid growth of revenue.
Life science: conventional reagent products are in large quantities, and the pillar sector strives for progress while maintaining stability
Upstream biological reagent products, as the core link of R & D, production and application of life science, have the attribute of “chip”. Excluding the disturbance related to covid-19, the company’s biological reagent revenue CAGR in 20172020 was about 49%, exceeding the market scale cagr16 in the same period 96%, with rich customer accumulation and product verification, with high certainty. We believe that the company is in the acceleration stage of domestic substitution. Thanks to the continuous expansion of downstream application scenarios and the acceleration of domestic substitution process catalyzed by the epidemic, the conventional molecular reagents are expected to continue to be in large quantities under the dual wheel drive of “category expansion + human efficiency”.
In vitro diagnosis: reserve a large amount of indicators and look forward to the marginal change of antigen detection
The company focuses on the development of scarcity, hypersensitivity and multi joint inspection indicators. The differentiation route avoids the homogeneous competition in the Red Sea market. The self-produced advantage weakens the possible decline in profits brought by the centralized mining policy, and has high growth. Referring to the approval rhythm of the company’s in vitro diagnostic reagent registration certificate, we expect that the reserve index may continue to increase in the short and medium term, and the revenue of conventional diagnostic reagents is expected to reach 220 million yuan in 2023. Meanwhile, the approval of covid-19 antigen detection kit has brought positive marginal changes to the company, and covid-19 related detection products are expected to continue to contribute cash flow.
Biomedicine: the pharmaceutical + vaccine scenario is large-scale, and the emerging sector can be expected in the future
With the rapid growth of biological medicine and vaccine market, upstream biological reagents and cro services are rapidly in large quantities. From 2020, the company began to lay out the biomedical sector, mainly providing biopharmaceutical raw materials, vaccine production raw materials and vaccine cro services. In 2020, the ability of this business in raw materials and services was verified. We expect that the biomedical sector will start to contribute revenue in 2021, with high potential and high elasticity. We are optimistic about the ceiling improvement of this sector under the expansion of customers, which is expected to become a new driving force for the medium and long-term development of the company.
Profit forecast and valuation
We expect the company’s EPS from 2021 to 2023 to be 1.83, 2.10 and 2.64 yuan / share respectively, corresponding to the closing price on March 31, 2022 and 46 times of PE in 2022. We believe that the company has the advantage of integrated expansion under the control of core raw materials. The volume sustainability of the three main businesses is expected to exceed expectations, and the “overweight” rating is given for the first time.
Risk tips
The risk of industrial policy changes, the risk of R & D falling short of expectations, and the risk of market development falling short of expectations.
