\u3000\u3 Guocheng Mining Co.Ltd(000688) 105 Nanjing Vazyme Biotech Co.Ltd(688105) )
Performance: regular business grew rapidly, and covid-19’s business contribution exceeded expectations
In 2021, the company’s revenue was 1.869 billion yuan, a year-on-year increase of 19.44%, and the net profit attributable to the parent company was 678 million yuan, a year-on-year decrease of 17.46%, all in line with the performance express value; The gross profit margin of main business was 81.34%, a year-on-year decrease of 10.21pct; The net interest rate was 36.30%, a year-on-year decrease of 16.22pct. We believe that the decline in the price of covid-19 nucleic acid raw materials affected by centralized procurement and intensified competition and the increase in the cost of covid-19 antigen detection kit are the main reasons for the decline in the company’s profit side.
In 2022q1, the company’s revenue was 975 million yuan, an increase of 80.07% year-on-year and 68.16% month on month; The net profit attributable to the parent company was 431 million yuan, a year-on-year increase of 28.18% and a month on month increase of 236.8%. We believe that the revenue and net profit increment brought by the approval of 2022q1 China antigen detection kit exceeded expectations.
Business analysis: driven by the three major businesses, we continue to be optimistic about the growth under the integrated expansion
Growth analysis: according to the business of the company’s 2021 annual report, the income of life science business is 1.339 billion yuan, including 533 million yuan of conventional business, with a year-on-year increase of 66%, and 806 million yuan of covid-19 business, with a year-on-year increase of 21%; The revenue from in vitro diagnosis business was 433 million yuan, including 89 million yuan for routine business, a year-on-year increase of 104%, 344 million yuan for covid-19 business, a year-on-year decrease of 34%; The income of biomedical business reached 97 million yuan, a year-on-year increase of 774%. We believe that from the perspective of performance, the regular business grew rapidly in 2021, and the synergy of the three sectors appeared, and the company’s integrated expansion ability was verified. In 2022, under the catalysis of positive policies, covid-19 business is expected to contribute cash flow stably.
Profitability analysis: according to the products of the company’s 2021 annual report: the gross profit margin of biological reagent is 91.79%, a year-on-year decrease of 3.75pct. We believe that it is mainly dragged down by the price reduction of covid-19 nucleic acid raw materials, and the gross profit margin of conventional reagent has little change; The gross profit margin of diagnostic reagents was 51.24%, with a year-on-year decrease of 33.64pct. We believe that it is mainly affected by the increase in sales of covid-19 antigen kit and related costs; The gross profit margin of diagnostic instruments was 7.22%, with a year-on-year increase of 4.4pct; The gross profit margin of technical services is 67.47%, which is expected to remain stable.
The sales expense rates in 2021 and 2022q1 were 17.10% (YoY + 5.1pct) and 9.22% respectively, and the R & D expense rates were 12.33% (YoY + 4.3pct) and 7.30% respectively. By the end of 2021, the company had 2380 employees, with a year-on-year increase of 94.44%, including 972 sales personnel and 652 R & D personnel, which is expected to increase to 1000 in 2022. We believe that the increase in the richness of the application scenarios of the company’s products and the increase in the rate of sales and R & D expenses reflect the company’s strong expansion ability and differentiation strategy.
Analysis of business quality: in 2021, the net cash flow generated by the company’s operating activities was 617 million, which was equivalent to the volume of net profit, reflecting the high operating quality of the company. In 2022q1, the operating cash flow was nearly 72.73 million yuan, a year-on-year decrease of 69.29%. We estimate that it is mainly due to the rapid growth of antigen detection business. In order to meet the demand for antigen detection, Considering the preparation of products, the company’s inventory and prepayment increased significantly (2022q1 inventory yoy + 72.2%, prepayment yoy + 140022%). We believe that with the digestion of front-end costs under business expansion and driven by the rhythm of product loading, the recovery trend of profitability and operation quality is expected to continue.
Strategic layout: “emerging business + overseas market” enables new growth in the future
Emerging business: relying on the self-produced advantages of its core raw materials and the support of key common technology platform, the company continues to layout along the industrial chain on the basis of existing mature business, newly develops animal quarantine terminal product line and consumables product line, incubates emerging businesses such as industrial enzyme preparation and high-end molecular materials, and is expected to contribute new growth points to the long-term development of the company.? Overseas business: the company’s overseas business layout is accelerated and the benefits are obvious. In 2021, the overseas sales revenue was 270 million yuan, accounting for 14.49% of the revenue. After going through the business model verification period, we expect that the overseas market is expected to increase in volume from 2022 to 2023.? Production input: the company has continued to invest in production and R & D support. According to the company’s 2021 annual report, “as of the end of the reporting period, the company has a total of more than 64000m2 biological reagent production base, in vitro diagnosis clean production workshop and GMP level fermentation and purification workshop, and newly put into operation an independent production workshop for high-throughput sequencing and standardization of molecular diagnostic enzyme raw materials” “The company plans to invest 1.3 billion yuan to build a production base of about 200000 square meters in Nanjing Economic and Technological Development Zone”.
Profit forecast and valuation
Based on the stable growth of the company’s mature businesses and the contribution elasticity of emerging businesses, we adjusted the EPS forecast for 20222023 to 2.39 and 2.72 yuan / share respectively (originally 2.10 and 2.64 yuan / share respectively), and added the EPS forecast for 2024 to 3.05 yuan / share. The closing price on April 22, 2022 corresponds to 30 times of PE in 2022. With reference to the valuation of comparable companies and the expansion advantages of corporate integration, we continue to be optimistic about the growth of the company from 2022 to 2024 and maintain the “overweight” rating.
Risk tips
Covid-19 epidemic fluctuation risk; Risk of changes in industrial policies; Risk of product quality and stability between batches; R & D is less than expected risk; Import substitution is less than expected risk; Market development is less than expected risk.
