\u3000\u30 Xuchang Ketop Testing Research Institute Co.Ltd(003008) 71 Hvsen Biotechnology Co.Ltd(300871) )
Performance overview: in the first quarter of 2022, the revenue decreased by 34.4% and the net profit attributable to the parent decreased by 96.8%. The company released the first quarterly report of 2022. Fy2022q1 achieved a revenue of 206 million yuan, a year-on-year decrease of 34.40%, and the net profit attributable to the parent company was 202.39, a year-on-year decrease of 96.81%.
The downstream aquaculture industry is still at the bottom of the cycle, and its income is declining under the background of weak demand. The animal protection industry has a certain post breeding cycle attribute. Since March 2021, the pig price has entered the downward stage of this cycle. In July 2021, the industrial capacity has entered the reduction stage, and the demand for pig products in the animal protection industry has decreased month on month. According to the data of the Bureau of statistics, by March 2022, the number of fertile sows in China has decreased to 41.85 million, a decrease of about 8.3% compared with the peak in June 2021. The company’s products are mainly pig products. In the first quarter of 2022, the pig price once again entered the deep loss range, affecting the downstream demand, and the high base in the same period of 2021. Therefore, the revenue in 2022q1 decreased by 34.40% year-on-year / 17.83% month on month respectively. When the pig price goes out of the deep loss range, the industry demand will gradually improve.
The cost of API continues to be under pressure, dragging down profits. The ring ratio has improved slightly, and it is expected to improve significantly from Q2. Affected by the soaring price of API in 2021, the company’s cost in 2021 is under pressure, while the price of API in 2022q1 has dropped significantly. However, due to the digestion cycle of raw material procurement and inventory for about 2-3 months, the cost pressure of fy2022q1 is still large, with the corresponding gross profit margin of -13.00pcts to 20.17% year-on-year and + 4.78% PCTs month on month. Some cost improvements have been reflected, which are gradually reflected with the reduction of the price of API industry And the production capacity of raw materials and drugs was gradually put into operation in, and it is expected that the gross profit margin level can be recovered and continuously improved from Q2. The administrative expenses increased significantly due to the increase of salary and depreciation. The increase of R & D investment led to the increase of R & D expense rate. In the first quarter, the sales expense rate / administrative expense rate / financial expense rate / R & D expense rate were 5.93% / 6.59% / 0.22% / 4.74% respectively, with a year-on-year change of + 0.95 / + 6.95 / – 0.21 / + 2.04pcts, The increase of cost drag and superimposed expenses has led to a sharp decline in the net interest rate to 0.98% (yoy-19.26pcts) and the increase in the proportion of group customers. It is expected to smooth the cyclical fluctuation of demand and fully benefit from the improvement of demand and the implementation of the new GMP. By the end of 2021, the proportion of the company’s group customers’ income has increased to 60% +. It is expected that the proportion of Q1 group customers will further increase, the breeding density of large-scale farms is high, the demand for epidemic prevention is relatively rigid, and the breeding scale is generally on the track of improvement. The continuous increase of the proportion of group customers can resist periodic fluctuations to a certain extent. The production capacity at the breeding end continues to be reduced. The second half of the year is expected to usher in the next round of boom, and the animal protection industry is expected to benefit. On the demand side, due to the prohibition of resistance at the feed end and the increase in the proportion of large-scale breeding in the industry since 2020, the demand for chemical drugs has been upgraded to high-efficiency therapeutic chemical drugs. At the same time, the time limit of the new GMP standard is approaching (May 31, 2022), and the backward industry capacity that fails to meet the new standard may be eliminated. The market competition situation is expected to be optimized. As an industry leader, the company is expected to fully benefit from the change of demand and the increase of industry concentration.
The integration of APIs and preparations and the large volume of new production capacity are expected to support the significant improvement of profitability. Since its listing, the company has steadily extended from preparation to API, with the existing production capacity of 240 tons of tylosin. In addition, the IPO API project in 2020 includes the over raised project, the 1000 tons of tylosin production capacity project (expected to be put into operation in mid-2022), and the convertible bond API project in 2021 includes the expansion project of tylosin production line with an annual output of 1000 tons and tylosin production line with an annual output of 600 tons. The API production capacity is gradually released, which is expected to fully ensure the product quality and supply, The cost control ability is expected to be improved and the profitability is expected to be significantly improved.
Under the background of high-end pharmaceutical research and development, we are optimistic about the continuous development of high-end pharmaceutical raw materials and products. As a leading company in the pharmaceutical industry, we are optimistic about the integration of high-end pharmaceutical products and in-service pharmaceutical industry. It is estimated that the net profit attributable to the parent company from fy2022 to fy2024 will be 203 million yuan / 285 million yuan / 385 million yuan, an increase of 52.61% / 40.35% / 35.42%, corresponding EPS of 1.22/1.71/2.32 yuan / share and PE of 18.2/12.9/9.6x respectively, maintaining the “buy” rating.
Risk tips: covid-19 has repeated epidemic, loss of business personnel, loss of customers and other risks.
