\u3000\u3000 Ningbo Menovo Pharmaceutical Co.Ltd(603538) (603538)
The company is a first-class supplier of characteristic APIs in China, with good growth in revenue and profit. The company is a pharmaceutical manufacturing enterprise specializing in the R & D, production and sales of characteristic APIs and finished drugs. Its core products cover the treatment fields of cardiovascular, central nervous system, gastrointestinal tract and so on. From 2016 to 2020, the company’s total operating revenue increased from 578 million yuan to 1.194 billion yuan, with a CAGR of 19.87%; The net profit attributable to the parent company increased from 78 million yuan to 167 million yuan, with a CAGR of 20.71%.
The demand for characteristic APIs is expected to maintain stable growth in the future. According to estimate Pharma, patent drugs with a total sales of nearly $160 billion will expire between 2020 and 2024. According to the price of generic drugs is about 10% – 20% of patented drugs, the substitution space of generic drugs in recent five years is about US $16-32 billion. The expiration of a large number of patented drugs will stimulate the continuous growth of the generic drug market and drive the expansion of the market scale of characteristic APIs. Economic development, the trend of social aging and the increasing demand for people’s health awareness will promote the stable growth of global demand for characteristic APIs.
The production layout of the company is reasonable, and the production capacity is expected to be released gradually. The company has been deeply engaged in the API industry for many years, and has four API production bases, covering the production capacity ranging from 50L to 10000l. The total volume of the existing reactor meeting the cGMP standard is 2200m3. With the gradual production of the company’s new API capacity, new customers and new projects will further increase, laying the foundation for the future growth of the company’s performance.
Accelerate the layout of new cdmo businesses and build future performance growth points. In the first half of 2021, the company achieved a total cdmo business sales revenue of 106 million yuan, a year-on-year increase of 113.40%. In April 2021, the company signed a ten-year cdmo strategic cooperation agreement with MSD, a large multinational pharmaceutical enterprise, in the fields of pet medicine, veterinary medicine and animal health care. This strategic cooperation reflects MSD’s full recognition of the company’s R & D technology, production and quality in the field of API, has a far-reaching and significant impact on the company’s development, especially the development of new cdmo business, and further enhances the company’s international competitiveness in the field of cdmo.
Investment suggestion: it is estimated that the company’s earnings per share in 2021 and 2022 will be 1.02 yuan and 1.21 yuan respectively, with corresponding valuations of 33 times and 27 times respectively. The company is a first-class supplier of characteristic APIs in China, and its core products cover the treatment fields of cardiovascular, central nervous, gastrointestinal and digestive tract. With the gradual production of the company’s new API capacity and the expansion of cdmo business, the company’s future growth can be expected. For the first time, the company will be given a “prudent recommendation” rating.
Risk warning. Product quality control risk, safety production and environmental protection risk, product R & D failure to meet expectations, etc.
