\u3000\u3 Shengda Resources Co.Ltd(000603) 456 Zhejiang Jiuzhou Pharmaceutical Co.Ltd(603456) )
Event overview
On April 19, 2022, Zhejiang Jiuzhou Pharmaceutical Co.Ltd(603456) released the annual report of 2021 and the first quarter of 2022: 1) annual report of 2021: the annual operating revenue of 2021 was 4.063 billion yuan, a year-on-year increase of 53.48%; The net profit attributable to the parent company was 634 million yuan, a year-on-year increase of 66.56%; The net profit deducted from non parent company in 2021 was 573 million yuan, with a year-on-year increase of 77.86%. 2) Performance in the first quarter of 2022: the operating revenue in the first quarter of 2022 was 1.374 billion yuan, a year-on-year increase of 60.46%; The net profit attributable to the parent company was 208 million yuan, a year-on-year increase of 120.13%; In the first quarter of this year, the net profit deducted from non parent company was 196 million yuan, with a year-on-year increase of 102.28%.
The profit side growth slowed down slightly in 2021q4, and the performance of 2022q1 was much higher than expected.
In 2021, the company’s main business maintained rapid growth, including cdmo revenue of 2.311 billion yuan, a year-on-year increase of 78.67%; The revenue of API business was 1.31 billion yuan, a year-on-year increase of 16.30%. Among them, the net profit attributable to the parent company in 2021q4 was 161 million yuan, a year-on-year increase of 13.85%, which decreased month on month, mainly due to the deduction of equity incentive fees and the settlement difference caused by exchange rate changes. In addition, the gross profit margin of the company in 2022q1 was 35.36%, and the profit side growth was much higher than expected, which was mainly due to the rapid growth of cdmo business and the further increase of main business proportion due to the continuous implementation and production of new projects in cdmo sector.
The strong growth of cdmo business will help the company take off in the future.
Following the acquisition of Novartis Suzhou plant, the company successively acquired Teva Hangzhou plant and Nanjing kangchuanji pharmaceutical in the second half of 2021. With sufficient capacity, it will further open the “ceiling” of cdmo business and successfully establish an integrated platform from intermediate to API to preparation. The company has deeply expanded its customers and product pipelines, further improved its R & D and product delivery capabilities, and the growth momentum of new business orders and projects is fast. The listed projects served by the company continue to be stable and large-scale, and the project revenue in the commercialization stage has increased steadily. By the end of 2021, the company’s cdmo sector had 20 listed projects, 49 phase III clinical projects and 582 phase II and phase I clinical projects, involving central nervous system, anti-tumor, anti heart failure, anti-virus and other treatment fields.
The characteristic API business grew steadily and continued to contribute to stable profits.
Characteristic API is the traditional business of the company. The production and operation of Jiangsu Ruike, a subsidiary, continues to be stable, contributing a net profit of 79.41 million yuan in 2021. The company has previously obtained the API imitation authorization of Pfizer generic MPP and will arrange production in Ruike and Hangzhou Taihua factories. It is expected to gradually realize its revenue and increase its performance flexibility in the second half of this year.
Investment suggestion: as an excellent example of the successful transformation of API into cdmo, the company has a close relationship with downstream pharmaceutical enterprises, strong support for new M & a production capacity, sufficient reserves and continuous and rapid volume of pipelines. It is estimated that the net profit attributable to the parent company from 2022 to 2024 will be 892 million yuan, 1218 million yuan and 1511 million yuan respectively; From 2022 to 2024, the valuation corresponding to the current stock price is 43, 32 and 26 times, maintaining the “recommended” rating.
Risk warning: price fluctuation risk of API; Risk that the volume of upstream products is less than expected; Exchange gain and loss risk, etc.
