\u3000\u3 Guocheng Mining Co.Ltd(000688) 185 Cansino Biologics Inc(688185) )
Financial performance: significant year-on-year turnaround, accelerated R & D and investment
On March 27, 2022, the company released its annual report for 2021, with an operating revenue of 4.3 billion yuan, a year-on-year increase of 17175%; The net profit attributable to the parent company was 1.91 billion yuan, and the net profit attributable to the parent company after deducting non profits was 1.8 billion yuan, turning losses into profits year-on-year. From the perspective of operating cash flow, in 2022, the net cash flow generated by the company’s operating activities was 2.05 billion yuan, and the cash paid for the purchase and construction of fixed assets, intangible assets and other long-term assets was 1.2 billion yuan, a significant increase year-on-year in 2020. In a single quarter, the revenue of 2021q4 was 1.21 billion yuan, an increase of 18.5% month on month; The net profit attributable to the parent company in 2021q4 was 580 million yuan, an increase of 46.3% month on month. We believe that the company’s revenue and profit growth in 2021 is in line with our expectations.
Growth driven: covid-19 vaccine driven, and the new momentum of mcv2 and MCV4 from 2022 to 2023
From a subregional perspective, the company’s foreign revenue in 2021 was 3.06 billion yuan, with a year-on-year increase of 48074%. According to the company’s annual report, the growth of foreign revenue “was mainly caused by the supply of covid-19 vaccine to Mexico, Pakistan and other overseas countries during the reporting period”. China’s revenue was 1.24 billion yuan, a year-on-year increase of 6600.7%. In June 2021, menahi (group A and group C meningococcal polysaccharide conjugate vaccine (CRM197 carrier)) obtained the drug registration certificate issued by the food and drug administration. Considering the company’s production, batch issuance and sales channel promotion time, we expect that the company’s sales growth in China in 2021 will mainly come from covid-19 vaccine sales. Looking forward to 2022, from the perspective of China and abroad:
Abroad: according to covid-19 vaccine tracker and the company’s announcement, the company has been approved covid-19 vaccine in Indonesia, Malaysia and other countries. Among them, the company has been approved booster injection in Malaysia. There is still room to improve the vaccination rate in Indonesia (about 55%), Pakistan (about 45%) and Kyrgyzstan (about 18%). However, according to the estimates of Duke and other institutions, the global covid-19 vaccine production capacity will be released rapidly from 2022: as of the end of January 2022, the data is expected that the global 17 covid-19 vaccine suppliers will produce about 10.97 billion doses in 2021 and 23.38 billion doses in 2022; Although 14.5% of low-income countries in the world have not been vaccinated with covid-19 vaccine, considering the fierce competition on the supply side and the high variability of covid-19 virus, from the perspective of prudence, we lowered our expectations for the company’s export sales of covid-19 vaccine in 2022, mainly based on (1) potential price reduction risk, (2) high initial immunization in approved countries and uncertain demand for booster shots.
According to the joint vaccine control mechanism of the State Council on February 19, 2024, “As of March 31, China had reported 3.270874 billion doses of covid-19 vaccine, with a total number of 1.2777709 billion people vaccinated. 1.242281 billion people had been vaccinated in the whole process, accounting for 90.63% of the total population, and 88.11% of the total population. 694936 million people had been vaccinated in the whole process, including 17.344 million people vaccinated in sequence. People over the age of 60 had been vaccinated in the whole process The number reached 223708 million, 212572 million people were vaccinated in the whole process, and 143637 million people were vaccinated. According to the latest statistics, the national vaccination rate of booster vaccination exceeded our expectations, but the number of sequential booster immunization was lower than our expectations; We believe that although heterologous reinforcement provides safer and more effective vaccination options from the clinical data, compared with homologous reinforcement, heterologous reinforcement depends more on market promotion and publicity, and the climbing may be slower. Therefore, we lowered our forecast for the company’s covid-19 vaccine sales in China in 2022. For mcv2 and MCV4, according to the company’s official website and the data of China Academy of inspection, the company has the batch issuance data of mcv2 since September 2021. We expect that MCV4 is expected to support revenue growth from the second half of 2022.
Profitability: it is estimated that the net profit from 2022 to 2023 will decrease first and then increase
In 2021, the company’s comprehensive gross profit margin was 69.9% and net profit margin was 44.4%; In terms of the cost rate structure during the period, the sales cost rate is 2.5%, and the R & D cost rate is 20.4%. We believe that Cansino Biologics Inc(688185) sales expense rate and gross profit margin are relatively low compared with comparable companies, which is related to the high proportion of covid-19 vaccine revenue of the company. Looking forward to 2022, from the perspective of gross profit margin, considering the potential price reduction risk of covid-19 vaccine, we expect the gross profit margin of covid-19 vaccine to decline, while the gross profit margins of mcv2 and MCV4 are relatively high. We expect that with the increase of the proportion of mcv2 and MCV4 revenue, the gross profit margin of the company may decrease first and then increase from 2022 to 2024; At the same time, we expect the sales expense rate to increase. According to the 2021 annual report, according to the 2021 annual report, the company’s clinical vaccine varieties include inhalation Ad5-nCoV COVID-19 vaccine, DTcP DPT vaccine combination, PBPV pneumonia protein vaccine, PCV13i pneumonia combined vaccine, TB- tuberculosis strengthening vaccine, among which PCV13i belongs to non biological products, and entered phase III clinical trials in April 2021, which has already met the relevant conditions of capitalization of R & D expenses. We expect that with the promotion of the company’s R & D pipeline in 2022, the company’s R & D expense rate will increase, resulting in a decrease in the company’s net profit margin in 2022.
Viewpoint: during the transition period of building a business platform, the change from 1 to n is worth looking forward to
We believe that 2021 is the turning point for the company to build a vaccine commercialization platform. The rapid growth of fixed assets and projects under construction in 2021 reflects that the company is in the transition period from biotech to biopharma. With the gradual maturity of the company’s production organization capacity and commercial operation and maintenance team, pipeline promotion and revenue growth are expected to gradually enter the fast lane. Under the principle of prudence, we lowered our profit expectation for the company in 2022, but we also pay attention to the important changes of the company in 2022: new progress is expected to be made in who PQ certification, the commercialization ability of mcv2 and MCV4 is built and strengthened under the expansion of sales team, and the mRNA technology platform is expected to continue to be improved and verified. Looking forward to 2023, we expect that with the further decline of covid-19 vaccine revenue, the company’s overall profit volatility is expected to decline, and gradually become an innovative vaccine pioneer with leading technical capabilities and rich product pipelines.
Profit forecast and valuation
Based on the above analysis, we lowered the company’s profit forecast from 2022 to 2023. It is estimated that the company’s EPS will be 1.48, 2.63 and 3.65 yuan / share respectively from 2022 to 2024, and the closing price on April 1, 2022 corresponds to 159 times of PE in 2022. We believe that 2022 is a transitional period for the establishment and verification of the company’s commercial platform. With the increase of the proportion of mcv2 and MCV4 revenue and the decrease of the proportion of covid-19 vaccine revenue, the company’s profit volatility is expected to decline; In the medium and long term, we are optimistic about the company’s technical advantages in the field of protein structure design and adenovirus vector platform. At the same time, we are optimistic about the company’s rapid promotion of sales team construction and international R & D cooperation with the help of covid-19 vaccine commercialization opportunities, so as to maintain the “overweight” rating.
Risk tips
The risk of failure in vaccine clinical research and development, the risk of repeated covid-19 epidemic, the risk of changes in China’s vaccine procurement policy, and the risk of lower than expected capacity release.
