\u3000\u3 Shengda Resources Co.Ltd(000603) 259 Wuxi Apptec Co.Ltd(603259) )
2022q1: strong revenue growth after deducting covid-19
Performance: the revenue of 2022q1 is 8.474 billion (yoy71.18%), and the revenue excluding covid-19 is 6.966 billion (yoy40.72%), showing the continuity of endogenous strong growth. Deduct non net profit of RMB 1.714 billion (yoy106.52%), and adjusted non IFRS net profit of RMB 2.053 billion (yoy85.82%). The net cash flow from operating activities decreased by 25.62% year-on-year, mainly due to the increase in receipts from main businesses. At the same time, due to the large business scale, the increase in orders from on-hand customers and the increase in inventory reserves, the procurement expenditure of the current period increased significantly.
Drug discovery: revenue yoy46 6%, verifying the high prosperity of global R & D
Drug discovery: high growth, high R & D and strong economic support. The revenue of the chemical business department is 6.118 billion (yoy102.11%), and the drug discovery revenue is 1.745 billion (yoy46.62%). We believe that the high growth rate of the company’s drug discovery revenue can reflect the continuous high boom of global innovative drug R & D investment, and the growth of long tail customers is still strong. With the continuous deepening of crdmo mode and the continuous improvement of customer recognition, the diversion from “R” to “D & M” is still expected to exceed expectations.
Cdmo: covid-19’s revenue is about 1.5 billion, with strong endogenous growth
Cdmo revenue is 4.373 billion (YoY 138.07%), and covid-19 revenue obtained through business splitting is 1.508 billion. After deducting covid-19 cdmo revenue, yoy reaches 52.30%, which means that the company’s non covid-19 cdmo business segment is still in the acceleration stage. We believe that it is mainly due to the continuous delivery of 14 new commercial projects in 2021q1 year-on-year and the rapid growth of new molecules (the number of polypeptide and oligonucleotide service molecules reached 121 yoy98%, and the service revenue reached 251 million yuan).
Split: ATU and test services have achieved eye-catching performance and are expected to continue high growth throughout the year
Test service: laboratory analysis and test drive. The income was 1.279 billion (yoy31.70%), including 909 million (yoy39.85%) from laboratory analysis and testing, and the income from safety assessment increased by 53% year-on-year. Clinical cro & SMO revenue 370 million (yoy15.21%). The SMO team has reached 4600 people (yoy26%), which is expected to continue the clinical research of enabling innovative drugs.
Biological services: new molecular biology is growing rapidly. The revenue was 533 million yuan (yoy26.17%), and the revenue related to new molecular types and biological drugs in the sector increased by 110% year-on-year, accounting for 17.6% of the revenue of biological business from 14.6% in 2021 to 17.6% in the first quarter of 2022. Biological services related to new molecular species have become an important driving force for the growth of the biological sector.
ATU: optimistic about entering a new stage of acceleration. With a revenue of 299 million (yoy36.99%), 2022q1 provides development and production services for 74 projects, including 59 preclinical and phase I clinical trials, 7 phase II clinical trials and 8 phase III clinical trials (4 of which are in the preparation stage of listing application). With the commercialization of service products, the year-on-year growth rate and profitability of ATU are expected to continue to improve.
Ddsu: revenue of 241 million (yoy-21.57%). The decrease in revenue is mainly due to the active iterative upgrading of the business of China’s new drug R & D service department to meet customers’ higher requirements for China’s new drug R & D services. Considering the cycle of platform upgrading, we expect to maintain a decline throughout the year, and platform iteration is expected to provide support for growth switching from 2023 to 2025.
Outlook: it is optimistic that the compound growth rate of income will be accelerated from 2022 to 2025
The company expects that the revenue of 2022q2 will be yoy63-65%, and the revenue of 2022 will increase by 65-70%. We continue to be optimistic about the stable growth of stock business from 2022 to 2025 under the continuous acceleration of capital expenditure of the company, and the performance elasticity brought by emerging businesses (polypeptide and oligonucleotide cdmo, preparation cdmo, ATU, etc.).
Profit forecast and valuation
We expect the company’s EPS to be 2.87, 3.29 and 4.28 yuan / share from 2022 to 2024. The closing price on April 25, 2022 corresponds to 34 times of PE in 2022 (30 times of PE in 2023), which is still relatively undervalued and maintains the “buy” rating.
Risk tips
Risk of declining prosperity of global innovative drug R & D investment; Risk of business decline due to unfavorable international expansion; Each competitive risk; Exchange risk; Uncertainty risk caused by fair value fluctuation.
