\u3000\u3 Shengda Resources Co.Ltd(000603) 351 Nanjing Well Pharmaceutical Group Co.Ltd(603351) )
Event description
The company released its annual report for 2021, realizing an operating revenue of 1.042 billion yuan, a year-on-year increase of 41.61%; The net profit attributable to the parent company was 101 million yuan, a year-on-year increase of 0.92%, and the deduction of non net profit was 985189 million yuan, a year-on-year increase of 12.52%. The comprehensive gross profit margin was 28.24%, a year-on-year decrease of 6 percentage points. ROE7. 33% (diluted), the net interest rate is 9.61%, the net operating cash flow is -115368 million yuan, the R & D expense is 414592 million yuan, and the R & D expense rate is 3.98%. Realize eps0 76 yuan, and 3 yuan (including tax) is proposed to be paid out of 10.
Event comments
Lubricant base oil contributes 71% of revenue, and pharmaceutical auxiliary contributes 57% of gross profit. The company achieved an operating revenue of 1.042 billion yuan in 2021, with a year-on-year increase of 41.61%. In terms of products, the income of lubricating oil base oil is 737 million yuan (+ 55.59%), of which the income of mechanical lubricating oil base oil is 523 million yuan (+ 65.56%), accounting for 50.21%; The revenue of pharmaceutical excipients was 266 million yuan (+ 17.88%), of which the revenue of injection grade excipients was 122 million yuan (+ 34.62%), accounting for 11.66%, and the revenue of non injection grade excipients was 144 million yuan (+ 6.69%), accounting for 13.83%. In terms of gross profit, the base oil of mechanical lubricating oil accounts for 32.33%, and the pharmaceutical excipients account for 57.24%, of which the adjuvants for injection account for 38.23%.
The sales volume of synthetic lubricating base oil was 41500 tons, an increase of 26.72% over the same period last year. The main sources of sales increment are as follows: first, the demand for synthetic hydraulic oil increased due to the capacity adjustment of China’s steel industry. The company is a major base oil supplier, and the increment in 2021 is obvious; Secondly, in the field of air conditioning and refrigeration, the lubricating base oil Poe series products suitable for the new energy-efficient compressor developed by the company in cooperation with downstream customers have passed the evaluation, the sales of new products have increased significantly, and laid a good foundation for future growth; In addition, the quality of synthetic ether and synthetic ester products produced by the company is equivalent to that of international companies, and overseas sales have increased. In terms of R & D, the company will focus on the high-end market demand, focus on the development of advanced synthetic products for lubrication such as new structure and meeting new demand, and focus on the synthetic base oil needs of new energy vehicles and emission reduction air conditioners to develop innovative products.
In terms of auxiliary drug business, in 2021, the sales volume of auxiliary injection drugs of the company was 453 tons, an increase of slightly more than 100 tons, of which propylene glycol contributed 90% of the increment. The sales volume of Tween 80 for injection exceeds 45 tons, maintaining a stable sales scale. The sales volume of Tween series used in biological agents is about 10% of Tween for injection, that is, about 4.5 tons. Tween for injection has obtained the DMF registration number of FDA. The company has earlier connected with and continuously tracked overseas customers, and is expected to achieve a breakthrough in overseas sales. The company has accelerated the research and development of new excipients and applied with preparations, providing support and guarantee for the needs of preparation enterprises for new excipients. At present, the company has obtained 51 varieties of pharmaceutical excipients with registration number on CDE platform, including 23 injection grade excipients. At the same time, actively develop and expand the supply of relevant pharmaceutical excipients required to combat covid-19 epidemic. In 2021, 9 new products of pharmaceutical auxiliary were filed in CDE and transferred to the production stage. The project with the largest proportion of R & D expenses is “R & D of customized excipients series products to meet the related development needs of preparation customers”, which accounts for 0.87% of the operating revenue. In addition, it also includes the R & D of squalene, the standard formulation and revision research of Pharmacopoeia Committee, the development of new brand products of span tween series, etc. Among them, the R & D investment of new or some new projects accounts for 48.61% of the total R & D expenditure. The company will strengthen the development of product series, continue to strengthen the company’s advantages in pharmaceutical excipients for injection, grasp the new demand for pharmaceutical excipients of special preparations such as sustained-release, transdermal and targeted drug delivery, keep up with the development demand of biological agents, and continue to launch varieties of pharmaceutical excipients with high technical content, high added value and strong competitiveness.
Rising raw material prices, depreciation and equity incentive costs have reduced the overall profit growth. The main upstream raw materials used by the company include ethylene oxide and propylene oxide. Among them, the consumption of ethylene oxide is 17555 tons and that of propylene oxide is 14015 tons. The average purchase prices of the two are 6732 yuan / ton and 15175 yuan / ton respectively, with price increases of 8.1% and 36.42% respectively. The rise of raw materials has a significant impact on the company’s profits. In September 2021, some units of the company’s raised investment projects were completed and put into trial production, the projects under construction were converted into fixed assets of 320 million, and the depreciation and amortization increased by 7.845 million yuan over the previous year. In addition, the management expenses brought by the implementation of equity incentive by the company were 154367 million yuan. The above three factors jointly pulled down the overall profit growth. In 2022, the company’s equity incentive cost will be about 30 million yuan. The depreciation of fixed assets will increase due to the new conversion to fixed assets, but the price of upstream raw materials has decreased significantly. At present, the average price of propylene oxide remains at about 11000 yuan / ton, which will help to restore the profit level.
Long term capacity planning of the company. Part of the 20000 ton auxiliary drug production capacity of the raised investment project was completed and put into trial production, and the progress was faster than expected. After the completion of the project, the annual net profit is expected to exceed 200 million yuan. According to the progress of the prospectus, the production load this year will reach 40%, and the corresponding net profit is expected to exceed 80 million. There is still room for further transformation and improvement of the production capacity of the project in the future. The company has planned the capacity of the acquired Demeng chemical plant, which will be mainly used for the reserve and improvement of chemical capacity in the future. At present, it is in the preliminary work of planning and construction, and will become a new development power of the company in the long term. In addition, according to public information, the company invested 200 million yuan to build a plant derived alternative anti additive project in Yangzhou. It is expected that the pilot production will be carried out in the middle of this year. After the first phase is put into operation and effective, the annual sales revenue will be about 150 million yuan. After the second phase is put into production, the annual sales revenue is expected to be more than 800 million yuan. This will provide a new profit growth point for the company.
Profit forecast, valuation analysis and investment suggestions
We believe that: 1) Nanjing Well Pharmaceutical Group Co.Ltd(603351) is the leader in the field of pharmaceutical excipients, especially in the field of injectable drugs. The company has reserved long-term development production capacity in the fields of pharmaceutical auxiliary and lubricating oil base oil. According to our calculation, after the production capacity is reached, it is expected to provide more than 2.5 billion revenue increment and more than 400 million net profit increment in the long term. The gradual trial production of 20000 tons of pharmaceutical auxiliary capacity in the medium term will alleviate the tension of capacity, reduce the co production of multiple varieties and reduce the loss of production line conversion, which is conducive to the improvement of efficiency. 2) The cost of raw materials has been greatly reduced this year, and the profit level of the company is expected to return to normal. 3) New products under development, including glycolide lactide copolymer, PEG4000 and polydocanol, continued to advance. Tween 80 obtained the DMF registration number, providing a basis for overseas sales. The commercialization of vaccine adjuvants is advancing, small-scale orders have been realized, and the company’s product sales progress, production capacity construction progress and research projects have been steadily promoted. 4) It is estimated that the company will realize sales revenue of 1.309 billion and 1.567 billion from 2022 to 2024 RMB 1.85 billion, with net profits of RMB 138 million, 179 million and 239 million. Based on the closing price of RMB 23.41 on April 18, the corresponding PE is 23.0, 17.7 and 13.3 times respectively. We continue to be optimistic about the future development of the company and give a “buy” rating.
There are risks
Including but not limited to: the risk of shutdown or logistics stagnation caused by epidemic changes; Risk of fluctuations in customer demand caused by changes in industrial policies; Environmental risks; Risk of price change of raw materials; The risk that the development and marketing progress of related approval preparations is slower than expected; Safety production risk, etc.
