\u3000\u3 Guocheng Mining Co.Ltd(000688) 315 Novogene Co.Ltd(688315) )
Event: on April 12, 2022, the company released its 2021 annual report. The company achieved a total operating revenue of 1.866 billion yuan, a year-on-year increase of 25.26%, a net profit attributable to the parent company of 225 million yuan, a year-on-year increase of 515.74%, and a net profit deducted from non attributable to the parent company of 176 million yuan, a year-on-year increase of 696.11%. In a single quarter, 2021q4 achieved an operating revenue of 590 million yuan, a year-on-year increase of 10.20%, and a net profit attributable to the parent company of 96 million yuan, a year-on-year increase of 8.05%.
The performance met expectations and actively overcome the impact of covid-19 epidemic. In terms of business: basic scientific research services of life sciences achieved an operating revenue of 656 million yuan, a year-on-year increase of 27.70%; Medical research and technical services achieved an operating revenue of 273 million yuan, a year-on-year increase of 8.45%; Sequencing platform services achieved an operating revenue of 704 million yuan, a year-on-year increase of 38.84%. In terms of regions, the Chinese market achieved an operating revenue of 1.198 billion yuan, a year-on-year increase of 24.62%; The overseas market realized an operating revenue of 666 million yuan, a year-on-year increase of 26.42%. Since 2020, all businesses of the company have been affected by covid-19 epidemic to varying degrees. Among them, basic scientific research services of life sciences and medical research and technical services have declined significantly in 2020. In 2021, the situation of covid-19 epidemic prevention and control worldwide is still severe. The company has actively overcome the impact of covid-19 epidemic, and all businesses have achieved positive growth throughout the year. Among them, sequencing platform services continue to maintain the development trend of rapid growth.
The level of intelligence has been improved, and the scale effect has gradually appeared. The company is the first enterprise in the industry to carry out the whole process production automation attempt. It has creatively developed the world’s leading flexible intelligent delivery system, which can realize the whole process automation of sample extraction, detection, database construction, library inspection, library pooling and biological information analysis. In 2021, the company completed the intelligent transformation of offline manual amplicon sequencing, continued to consolidate the advantages of the company’s intelligent production, significantly reduced labor costs and compressed product delivery cycle. In 2021, the company’s gross profit margin reached 42.89%, an increase of 7.77 PCT year-on-year in 2020 and 3.74 PCT year-on-year in 2019 before the epidemic. When the marginal cost of sequencing in the industry decreases, the increase of the company’s gross profit margin is mainly due to the improvement of the level of intelligence. In 2021, the company’s net profit margin on sales reached 12.25%, an increase of 9.94 PCT year-on-year in 2020 and 4.79 PCT year-on-year in 2019 before the epidemic. The company’s management expense rate and sales expense rate decreased significantly. We believe that the fixed cost expenditure of the gene sequencing service industry is high. As the world’s leading sequencing service provider, the scale effect will gradually appear with the increase of market share.
Continue to improve the sequencing service capacity and explore clinical application products. Since 2021, the company has continued to increase investment in infrastructure: the British experimental center has passed a number of authoritative certifications and began to carry out clinical sequencing services based on ngs; XINJIAPO experimental center and Tianjin Experimental Center completed the expansion of the third-generation sequencing platform, and the company officially became an officially certified sequencing service provider of pacbio; Start preparations for new laboratories in Shanghai and other places, and continue to improve the coverage of specific areas. Since 2021, the company has continued to explore clinical application products and further developed admission business based on the approved ngs concomitant diagnostic kit. By the end of December 2021, the company has completed the bid winning admission of nearly 40 core hospitals, and the sample size has increased rapidly. We believe that the company has set up localized laboratories in Tianjin, Nanjing, Singapore, the United States and the United Kingdom, with perfect infrastructure and leading service capacity. The improvement of production capacity and clinical exploration will help the company open the ceiling of growth.
Investment suggestion: we estimate that the company’s operating revenue from 2022 to 2024 will be 2.518 billion, 3.305 billion and 4.255 billion respectively, the net profit attributable to the parent company will be 304 million, 409 million and 543 million respectively, the corresponding EPS will be 76 yuan, 102 yuan and 136 yuan respectively, and the corresponding PE will be 31.4 times, 23.4 times and 17.6 times respectively, giving the investment rating of buy-a.
Risk tip: the risk of intensified industry competition; Covid-19 epidemic uncertainty risk; Risk of dependence on upstream suppliers.
