\u3000\u3 Guocheng Mining Co.Ltd(000688) 202 Shanghai Medicilon Inc(688202) )
Event overview
The company released its 2021 annual report: the annual operating revenue was 1.167 billion yuan, a year-on-year increase of 75.28%; The net profit attributable to the parent company was 282 million yuan, a year-on-year increase of 118.12%; The non net profit deducted was 271 million yuan, a year-on-year increase of 119.53%; The net cash flow from operating activities was 453 million yuan, a year-on-year increase of 118.00%.
Analysis and judgment:
The performance continues to grow rapidly and the profitability continues to improve
In 2021, the company achieved an operating revenue of 1.167 billion yuan, with a year-on-year increase of 75.28%, of which Q4 achieved an operating revenue of 381 million yuan in a single quarter, with a year-on-year increase of 63.49%. On the basis of the high growth rate of new orders signed for three consecutive years from 2019 to 2021 (the new orders signed in 20192021 were 616 / 13.07 / 2452 million yuan, with a year-on-year increase of 46.5% / 112.2% / 87.7% respectively), the trend of rapid growth continued. In addition, under the condition that the company continuously optimizes its operating efficiency and the scale effect is gradually reflected, the comprehensive gross profit margin in 2021 is 45.34%, with a year-on-year increase of 4.27pct and net profit margin of 24.39%, with a year-on-year increase of 4.24pct, and the profitability continues to improve.
(1) preclinical research business: it shows a trend of rapid growth, especially its domestic business has more than doubled: the company’s preclinical research business has achieved an operating revenue of 553 million yuan, with a year-on-year increase of 78.19%, of which the domestic preclinical research business has increased by 106.44% year-on-year, and continues to benefit from the dividends of China’s innovation; The gross profit margin of this business in 2021 was 48.77%, with a year-on-year increase of 3.25pct. The profitability showed an upward trend and has gradually approached the gross profit margin level of Joinn Laboratories (China) Co.Ltd(603127) of similar companies.
(2) drug discovery and pharmaceutical research business: benefiting from China’s innovation dividend and the continuous expansion of international business, it shows rapid growth. The company’s drug discovery and pharmaceutical research business realized an operating revenue of 613 million yuan in 2021, with a year-on-year increase of 72.68%, of which the domestic and overseas businesses increased by 75.7% and 65.8% respectively, benefiting from China’s innovation dividend and the continuous expansion of international business; The overall gross profit margin of this business in 2021 was 42.18%, with a year-on-year increase of 5.04pct, continuing to show an upward trend.
From the supply side, the laboratory capacity, personnel and new technology platform are all in rapid improvement
Since 2019, the company has benefited from China’s innovation dividend and active overseas market expansion, and its performance has achieved rapid growth. On this basis, the company’s supply side has also improved rapidly, including the rapid production of Nanhui Park, an IPO raised investment project, the rapid growth of employees, and the expansion of business scope brought by strengthening R & D.
(1) the laboratory capacity is increasing rapidly: the laboratory capacity of the company has increased from more than 30000 square meters in 2019 to 66900 square meters by the end of 2021, mainly for the rapid production of Nanhui Park, an IPO raised investment project. Looking forward to the future, the company issued a fixed growth plan in February 2022, which plans to raise a total of no more than 2.160 billion yuan, which will be used to further expand the capacity of Nanhui Park and build a new laboratory capacity base in Baoshan to meet the needs of future business development in the next 5-10 years.
(2) rapid expansion of employees: the number of employees of the company has increased from 1219 at the end of 2019 to 2440 in 2021. In particular, the number of employees in 2021 increased by 48.60% year-on-year, realizing the increase of employee capacity at the supply side of the company. In addition, since its listing in 2019, the company has implemented equity incentive for two consecutive years from 2020 to 2021, with a cumulative incentive staff of 413, so as to realize the normalization of equity incentive for core employees and the consistency of the interests of core employees with the company and shareholders.
(3) strengthen the development of new technology platforms to meet the needs of incremental customers: the company’s R & D investment in 2021 was 78 million yuan, a year-on-year increase of 65.57%, accounting for 6.66% of revenue, mainly to improve the company’s R & D service capacity and business undertaking capacity. In 2021, the company started the construction of AI based drug development platform, continued to strengthen the capacity construction of protac platform and improve the preclinical research of new technology therapies such as biological macromolecules, cells and genes, so as to further improve the company’s R & D service ability and meet the needs of incremental customers.
Investment advice
As a scarce target of preclinical integration in China, looking forward to the next 5-10 years, the company will continue to cultivate drug discovery + CMC + preclinical research business, continue to benefit from the high prospect of the Chinese market, the continuous expansion of overseas markets and the continuous landing of CMC business, and is expected to become one of the leaders of preclinical cro in China looking forward to the world. Considering the strong and rapid growth of drug discovery and preclinical research business orders and operating revenue, slightly adjust the early-stage profit forecast, that is, the revenue is adjusted from RMB 1.983/2.975 billion of operating revenue in 20222023 to RMB 1.993/30.87/4.610 billion in 20222024, and the EPS is adjusted from RMB 7.79/11.78 in 20222023 to RMB 7.83/12.04/17.96 in 20222024, corresponding to the closing price of RMB 402 / share on April 6, 2022. The PE is 51.32/33.39/22.38 times respectively, Maintain the “buy” rating.
Risk tips
The company’s order demand is lower than expected, the investment in the investment projects is lower than expected, the loss of core technical backbone and management, the risk of intensified competition, and the impact of New Coronavirus epidemic.
