\u3000\u3000 Pharmaron Beijing Co.Ltd(300759) (300759)
The management commented on two recent business developments: 1) the acquisition of aesica, a commercial production base of APIs in the UK, will contribute more than 100 cubic meters of capacity to supplement the existing overseas small molecule cdmo capacity, although its short-term revenue contribution is limited; 2) Repeated outbreaks in China have limited impact on CMO business in Tianjin and Shaoxing; Shaoxing phase I production capacity of 600 cubic meters is expected to be put into operation in the first half of the year. We maintain the buy rating of Pharmaron Beijing Co.Ltd(300759) H shares and a shares, and the target price of H shares is HK $202.6 and the target price of A-Shares is RMB 208.5. After the recent sharp fluctuations in the stock price, we believe that this is a good time to configure Pharmaron Beijing Co.Ltd(300759) .
Aesicapharmaceuticals Limited (APL), a British API commercial production base of recipharm, was acquired to further enhance the company’s overseas cdmo capacity: APL, located in cramlington, UK, has a production capacity of more than 100 cubic meters and a production team of about 120 people. Previously, it mainly engaged in the production of generic API. Although APL contributes little to Pharmaron Beijing Co.Ltd(300759) revenue in the short term and lacks the ability of innovative drug process development, APL’s mature production system and FDA / mrha production qualification certification can provide a good supplement to the company’s existing UK cdmo business and process development / early API production team, and there is considerable room for subsequent transformation, upgrading and production expansion. The company previously acquired the plant in hoddesdon, UK from MSD in 2017. At present, the number of process and operation teams has exceeded 200. In the follow-up, the two plants will cooperate to meet the needs of overseas CMC and customers for the production of API in different regions, and can better manage the local capacity arrangement in the context of repeated global epidemics.
The release of existing business and new capacity is limited by the repeated impact of the Chinese epidemic: the recent Chinese epidemic has repeatedly affected the company’s CMO business operations in Tianjin and Shaoxing, but the management said that the overall impact is limited. The company’s plant in Tianjin is located in the West Zone of the economic and Technological Development Zone, which is not under the strict control of the government. Although about 1 / 6 of the employees are affected by the epidemic control measures and cannot leave the living area, the overall impact lasts only 1-2 days. The first 200m3 production capacity of Shaoxing Shangyu phase I project has been delayed for 3-4 weeks, but the preparations have been fully restored. It is expected that the first feeding will be realized in mid January, and other work progress is also actively catching up. The last 400 cubic meters of phase I is expected to be put into use in the second quarter, which is consistent with previous expectations. At present, Shaoxing CMO production capacity has received some orders. We expect that after phase I is officially put into operation, it will support 30-40% revenue growth in the next 2-3 years.
There are buying opportunities after the recent stock price correction: after the recent correction, the company’s valuation has basically been at the historical bottom since the seller’s profit forecast: 2022epe of a share is 51.7x, lower than the historical average of 1.1 standard deviation; The 2022epe of H shares was 37.1x, 2.4 standard deviations lower than the historical average. Therefore, we maintain the buy rating and target price of the company. Our target price of A-Shares / H shares is 208.5 yuan / HKD 202.6 yuan respectively, corresponding to 84x / 68x2022epe and 2.2x/1.7x2022epeg; The target PE of A-Shares and H shares are 1 standard deviation higher than the historical average, while the target peg of A-Shares and H shares are equivalent to the historical average.
Investment risk: the growth of project orders is slower than expected; Fluctuation of investment income; The epidemic situation has been greatly repeated.
