\u3000\u3 Shengda Resources Co.Ltd(000603) 127 Joinn Laboratories (China) Co.Ltd(603127) )
Key investment points
Event: the company achieved a total operating revenue of 1.517 billion yuan in 2021 (+ 40.97%, which indicates the year-on-year growth rate in brackets, the same below); The net profit attributable to the parent company was 557 million yuan (+ 76.96%); Deduct 530 million yuan (+ 81.63%) of net profit not attributable to parent company; Net operating cash flow was 686 million yuan (+ 60.06%). In Q4 alone, the company achieved a revenue of 660 million yuan (+ 48.49%) and a net profit attributable to the parent company of 309 million yuan (+ 80.48%).
The company’s performance met expectations and the gross profit margin decreased slightly. In 2021, the revenue of preclinical drug research services was 1.483 billion yuan (+ 40.83%), accounting for 97.75% of the total revenue; Clinical service revenue was 31 million yuan (+ 45.47%); The income from the supply of experimental animals was 3.55 million yuan, an increase of 63.68% over the same period last year, faster than the overall business growth. The gross profit margin of the company’s main business in 2021 was 48.73%, a decrease of 2.65 PCT compared with the same period last year, mainly due to the increase of animal purchase price and the increase of clinical service business cost. Considering the scarcity of the company’s production capacity in China’s innovative drug industry chain and the transfer of animal costs to clients, the company’s profitability is expected to remain stable.
Capacity expansion helps order growth. The company continued to expand its production capacity to meet the demand for order growth. By the end of 2021, the amount of orders on hand was about 2.9 billion yuan, an increase of 70.59% over the same period last year. Zhaoyan (Suzhou) started the decoration project of animal house with an area of about 7500 square meters in 2021, which was completed and put into use at the end of 2021. Suzhou Zhaoyan plans to complete the construction of 20000 square meters of phase II facilities in 2022, and the company expects to officially put into use in the second half of 2022; The subsidiary Zhaoyan Yichuang plans to lease 9000 square meters of laboratory to carry out drug screening and pharmacodynamic test; The 3000 square meter test facility in Zhaoyan, Wuxi is expected to be put into use in the second half of 2022. The company’s personnel grew rapidly. In 2021, the company had 1590 R & D technicians, a year-on-year increase of 46%. On the premise of sufficient orders, the release of production capacity is expected to form a scale effect. At the same time, the company’s expanding business is expected to play a synergistic role to further drive the growth of orders.
Adhere to the internationalization strategy and achieve results in overseas layout. After the company’s H-share listing on February 26, 2021, it deepened its overseas business layout, improved its global pharmaceutical R & D service capacity, and continued to increase its overseas sales orders. In 2021, biomere, an overseas subsidiary, undertook orders of about 280 million yuan, with a year-on-year increase of more than 75%, realizing rapid growth; Meanwhile, biomere’s customers can entrust other cro services to China Zhaoyan to form a Sino US linkage with China laboratories. In 2021, Zhaoyan China company undertook overseas orders of about 160 million yuan, a year-on-year increase of more than 100%, continuing the high growth trend. Zhaoyan California newly renovated and invested about 6000 square meters of test facilities in 2021, which alleviated the production capacity shortage of biomere and was conducive to the development of West Coast business in the United States. In addition, both the company and its subsidiary Suzhou Zhaoyan passed the GLP examination of China’s non clinical cro for the first time in the history of PMDA in Japan, reflecting the company’s ability to provide overseas services. The international layout is expected to help the company’s long-term performance growth.
Profit forecast and investment rating: considering that the company is one of the leaders in the field of safety assessment, enjoying high dividends in the industry, capacity expansion and sufficient orders, we raised the company’s net profit attributable to the parent company from RMB 614 / 817 million to RMB 707 / 909 million in 20222023. It is expected that the net profit attributable to the parent company in 2024 will be RMB 1.084 billion, corresponding to 60 / 47 / 39 times of PE in 20222024, maintaining the “buy” rating.
Risk tips: market competition risk, new business development risk, covid-19 epidemic and other force majeure risks, exchange profit and loss risk, etc.
