1. The short-term performance of CXO sector is determined to be high growth, and the long-term industrial expansion can be expected
In the short and medium term: according to the performance indicators such as revenue and profit, the change trend of performance forward-looking indicators such as orders, fixed assets, projects under construction and capital expenditure: the revenue and profit continue to grow, and the growth rate remains at a high level; Large volume of orders and high growth rate; Fixed assets, construction in progress and capital expenditure continue to expand rapidly and continuously release production capacity; We believe that CXO enterprises have strong certainty of high performance and growth in the short and medium term;
In the medium and long term: according to the industry prosperity indicators such as investment and financing activity in the primary market and enterprise R & D expenditure, we believe that with the rise of innovative drugs and emerging therapies such as ADC and CGT, the related CXO business will bring considerable incremental market to the industry, continue to ensure high performance growth and promote high prosperity of the industry.
2. The valuation of CXO sector is currently at a historical low, and the market recovered in March and entered the value range
In terms of valuation, disturbed by international relations and short-term investment and financing, the valuation of CXO sector is currently at a historical low and cost-effective. At present, the PE (TTM) of major CXO companies has been generally reduced to below 100x. Recently, with the release of annual reports in 2021, the market expectation has gradually improved and the market shows signs of recovery.
3. The investment and financing data fluctuated monthly, and the investment and financing events in the field of innovative drugs were still active in March
Investment and financing data: there are large monthly fluctuations. The market is worried that the deterioration of the investment and financing environment will affect the scale and growth rate of new orders signed by CXO company. We believe that the monthly fluctuation of the investment and financing data of the primary market is a normal phenomenon. The first quarter is the off-season and is in the low range. The investment and financing events in the field of innovative drugs were still active in March. A total of 34 projects completed financing, covering the whole primary market investment and financing stage of seed IPO.
4. The high prosperity of the industry continues, focusing on cost-effective investment opportunities
On the one hand, CXO head enterprises continue to undertake global orders, explore overseas markets, maintain a rapid growth trend in revenue, and the market valuation gradually enters a reasonable range. We suggest paying attention to Wuxi Apptec Co.Ltd(603259) , Pharmaron Beijing Co.Ltd(300759) and Asymchem Laboratories (Tianjin) Co.Ltd(002821) and Porton Pharma Solutions Ltd(300363) ;
On the other hand, high growth companies with comparative advantages and their own characteristics will gradually deeply integrate into the global new drug R & D system and usher in a valuable opportunity period for their own development. It is expected that their business performance will continue to show a trend of rapid growth in the future and have investment value. Baicheng medicine, Beijing Sun-Novo Pharmaceutical Research Co.Ltd(688621) etc. are recommended.
Investment suggestion: CXO’s high vision will continue, focusing on cost-effective companies
The high outlook of CXO industry will continue: through the tracking of relevant indicators of R & D heat outside China (capital level and pipeline level), we believe that at present, new drug R & D in the world and China continues to remain active. Due to the gradual transfer of global industrial chain to China and the rapid growth of Chinese demand, it is expected that the high outlook of CXO industry will continue.
Focus on cost-effective investment opportunities: on the one hand, CXO head enterprises continue to undertake global orders, explore overseas markets, maintain a rapid growth trend in revenue, and the market valuation gradually enters a reasonable range. We suggest paying attention to Wuxi Apptec Co.Ltd(603259) , Pharmaron Beijing Co.Ltd(300759) and Asymchem Laboratories (Tianjin) Co.Ltd(002821) and Porton Pharma Solutions Ltd(300363) ; On the other hand, high growth companies with comparative advantages and their own characteristics will gradually deeply integrate into the global new drug R & D system and usher in a valuable opportunity period for their own development. It is expected that their business performance will continue to show a trend of rapid growth in the future and have investment value. Baicheng medicine, Beijing Sun-Novo Pharmaceutical Research Co.Ltd(688621) etc. are recommended.
Tracking index market and performance review
Market trend: the market gradually warmed up in March, and the valuation of major CXO companies entered the value range
Historical performance: revenue and profit continued to grow, and the growth rate remained at a high level
Performance drivers / forward-looking indicators
Large order volume and high growth rate
Fixed assets, construction in progress and capital expenditure continued to expand rapidly and continuously release production capacity
Industry prosperity index
China’s R & D heat index maintained an upward trend
The global R & D heat index remains at an all-time high
