\u3000\u3 Shengda Resources Co.Ltd(000603) 456 Zhejiang Jiuzhou Pharmaceutical Co.Ltd(603456) )
Key points
Event: the company released its annual report for 2021, which realized a revenue of 4.063 billion yuan (+ 53.48% YoY), a net profit attributable to the parent of 634 million yuan (+ 66.56% YoY), and a net profit not attributable to the parent of 573 million yuan (+ 77.86% YoY), which was in the middle of the performance forecast. At the same time, the company released the first quarterly report of 2022, which achieved a revenue of 1.374 billion yuan (+ 60.46% YoY), a net profit attributable to the parent of 208 million yuan (+ 120.13% YoY), and a net profit not attributable to the parent of 196 million yuan (+ 102.28% YoY), exceeding market expectations.
The performance of 22q1 exceeded expectations, and the gross profit margin in 22 years is expected to gradually rise. The first quarter report of the company in 2022 exceeded market expectations, mainly due to the improvement of cdmo business customer coverage, the large volume of new business orders and the stable large volume of commercial projects. In 2021 and 2022q1, the company’s gross profit margin was 33.33% and 35.36% respectively, with a year-on-year increase of -4.18pp and + 4.11pp respectively. We expect that the negative impact of industrial factors such as the price rise of upstream raw materials and the appreciation of RMB on the company’s gross profit margin is expected to gradually weaken.
Cdmo continues to grow rapidly, and the expansion of new projects is accelerated. In 2021, the cdmo business revenue of the company was 2.311 billion yuan (+ 78.67% YoY), and the gross profit margin was 38.58% (- 2.76 ppyoy). 1) Customers / orders: in terms of customer development, the company has formed deep embedded cooperation relationships with Roche, zoetis, gliead and the first three companies outside Novartis. In 2021, it served more than 800 partners around the world. In terms of project structure, by the end of 2021, the company had 20 / 49 / 582 listed, phase III, phase I and phase II projects respectively, with a total of 157 new projects, and the funnel-shaped order structure continued to strengthen. 2) Capacity: at present, the company has four cdmo production bases: Ruibo Suzhou, Zhejiang Ruibo, Ruibo Taizhou and Taihua Hangzhou (formerly a subsidiary of Teva), and adopts the principle of “matching capacity expansion with business orders”. Ruibo Suzhou has started the construction of pilot workshop, which is expected to be completed and put into use in 2022, and the construction of two other commercial workshops is expected to start in 2022; Zhejiang Ruibo has significantly improved its operation efficiency through modularization and automation transformation. At the same time, it has gradually shifted the production capacity of some generic API to release more production capacity to cdmo business; Ruibo Taizhou will add 287 mu of land, and four workshops are expected to be built in 2023 and put into use in early 2024. To sum up, the company’s cdmo business benefits from the downstream volume of commercial varieties in the short term, medium and long-term customer reserves and project structure optimization to ensure sufficient development momentum.
API business grew steadily. In 2021, the company’s API business revenue was 1.31 billion yuan (+ 16.30% YoY), and the gross profit margin was 32.51% (- 5.51 ppyoy). Among them, the incomes of anti infection, central nervous system, non steroidal anti-inflammatory and hypoglycemic were 4.51/3.87/2.12/260 billion yuan respectively, with a year-on-year increase of 20.14% / 0.29% / 5.81% / 57.69% respectively. API business is expected to maintain steady growth as API products under research are listed one after another.
Profit forecast, valuation and rating: considering that the company’s 22q1 performance exceeded expectations, the continuous high growth of cdmo business and the steady growth of API business, we raised the company’s net profit attributable to the parent company from 22 to 23 to 893 / 1245 million yuan (an increase of 10.6% / 17.6% respectively compared with the original forecast), and the new forecast of net profit attributable to the parent company for 24 years to 1.699 billion yuan. According to the latest equity calculation, EPS was 1.07/1.49/2.04 yuan respectively, and the current price corresponding to PE was 43 / 31 / 23 times respectively, Maintain the “buy” rating.
Risk tip: the negative impact of exchange rate fluctuations, the decline of API prices, the volume of cdmo business is lower than expected, and the covid-19 epidemic affects the business expansion outside China.
