Baicheng medicine (301096)
Key points of investment: 1) the generic pharmaceutical industry has entered a new era of “science and technology + quality”, and the cro industry has risen: generic pharmaceutical is the leading force in the China Meheco Group Co.Ltd(600056) market, and the consistency evaluation +mah system has brought more customer increments to the generic pharmaceutical cro industry; 2) “Entrusted R & D services + transformation of independent R & D achievements” two wheel drive: the company has a complete core technology cluster and rich industry experience, has strong competitive advantage, and its performance growth rate ranks in the forefront of the industry. The two wheel drive of preclinical pharmacy business and transformation of self-developed technical achievements promotes the high growth of the company’s performance; 3) At the same time, it is expected to become a new growth point of cdmo’s business layout and service field in the future.
The generic pharmaceutical industry has entered a new era of “science and technology + quality”, and cro keeps up with the trend: 1) generic drugs are still the leading force in China Meheco Group Co.Ltd(600056) Market: among the chemical drugs approved for production in 2020, there are 14 varieties of innovative drugs and 722 generic drugs. Among the chemical drugs approved for production, generic drugs account for 98.1%; 2) The consistency evaluation has developed steadily, and there are still many reagents in the trial stage: at present, the consistency evaluation of generic drugs is still aimed at chemical generic drugs, and only oral preparations and injections are officially launched, and the evaluation guiding principles of biological similar drugs are still in the trial stage; 3) The MAH system separates drug ownership and production, bringing more customer increment to the cro industry: accelerate the transformation of cro enterprises with R & D capacity but not production capacity from R & D outsourcing service providers to professional pharmaceutical R & D institutions; 4) Normalization of volume procurement: the variety and quantity of procurement are increasing year by year, and the average price reduction of drugs purchased in volume is more than 50%.
Driven by “entrusted R & D services + transformation of independent R & D achievements”, actively expand new business areas: 1) benefiting from policy dividends, the company’s operating revenue increased rapidly, and the profit growth rate was higher than the revenue growth rate: the company’s net profit attributable to the parent company reached 115.9% in 20182021, and the net profit attributable to the parent company increased by 93.5% in 2021, showing a bright performance; 2) Preclinical pharmacy business is the cornerstone of the company’s revenue: in 2021, the revenue was 160million, accounting for 42.6%; The fastest growth rate of self-developed technology achievement transformation business: from 2018 to 2021, CAGR was 118.2%, of which the revenue in 2021 increased by 93.1% year-on-year; 3) The company actively expands new business areas: expanding independent research and development of innovative drugs, some pharmaceutical entrusted research and development services and cdmo business.
The company’s core competitiveness helps the company become a pioneer in China’s generic drug cro industry: a complete core technology cluster constitutes the company’s strong core competitiveness: the company has a complete technical system in the field of generic drug development and consistency evaluation, can cover the whole process of drug research and development, has rich industry experience and strong comprehensive competitiveness; As a “pharmaceutical + clinical” comprehensive cro company, the company has deeply cultivated the field of generic cro and has become a pioneer in China’s generic cro industry.
Investment suggestion: we expect the company’s revenue to be RMB 640 million / 1.01 billion and the net profit attributable to the parent company to be RMB 220 million respectively from 2022 to 2023. As a pioneer of generic drug cro, the company’s performance has increased significantly with the business model of “entrusted R & D + achievement transformation”. At the same time, the company has arranged cdmo services, independent R & D of innovative drugs and some pharmaceutical entrusted R & D services. It is expected to contribute outstanding performance in the future to ensure the long-term sustainable development of the company. For the first time, give a “buy” rating.
Risk tips: the risk of drug R & D failure, the risk of long drug R & D cycle, and the management risk caused by the expansion of business scale
