\u3000\u3 Shengda Resources Co.Ltd(000603) 538 Ningbo Menovo Pharmaceutical Co.Ltd(603538) )
Event: the company released the annual report of 2021 and the first quarterly report of 2022: in 2021, the company achieved a revenue of 1.258 billion yuan, a year-on-year increase of 5.43%; The net profit attributable to the parent company was 143 million yuan, a year-on-year decrease of 8.62%; Net profit after deduction of non return to parent was 126 million yuan, with a year-on-year increase of 56.46%. In the first quarter of 2022, the company achieved a revenue of 500 million yuan, a year-on-year increase of 47.86%; The net profit attributable to the parent company was 115 million yuan, a year-on-year increase of 128.94%; The net profit deducted from non parent company was 109 million yuan, with a year-on-year increase of 142.75%.
Event comments:
Cdmo business is growing rapidly. In 2021, the company’s cdmo business realized a revenue of 265 million yuan, a year-on-year increase of 118.31%, accounting for 21% of revenue, and the gross profit margin increased by 18.99pct year-on-year to 44.54%. The cdmo business of the company has established business cooperation with more than 100 excellent pharmaceutical enterprises at home and abroad, with more than 200 ongoing projects, and has established cooperation with new pharmaceutical companies at home and abroad such as developing pharmaceutical industry. In 2021, the company signed a ten-year cdmo strategic cooperation agreement with MSD, a large multinational pharmaceutical enterprise, in the fields of pet medicine, veterinary medicine and animal health care; By the end of 2021, the nine projects in the first phase of R & D have carried out work in different stages, and the technology transfer has been gradually completed, which is about to be commercialized. At the same time, the company has undertaken cdmo businesses such as basic fragments of small nucleic acid drug synthesis and raw materials of nucleic acid detection reagents, so as to provide raw materials for mainstream nucleic acid detection products in China and build a new performance growth point for the company.
We actively implemented the formulation business development strategy of “technology transfer + independent declaration + China MAH cooperation”, and the formulation business grew rapidly. In 2021, under the background of the policy of centralized purchase of generic drugs, the company’s preparation sector had a strong development momentum. The annual revenue was 153 million yuan, with a year-on-year increase of 103.58%, and the gross profit margin increased by 16.88 PCT to 47.27%. Taking advantage of the industrial chain of APIs, the company focused on the research and development of preparations with superior varieties of APIs. At the same time, it actively implemented the preparation operation and development strategy of “technology transfer + independent declaration + China MAH cooperation”, deepened the vertical integration and coordination of the whole industrial chain, improved the comprehensive competitive strength of the company, grasped the rapid commercialization and large-scale opportunities brought by the national centralized procurement policy, and achieved phased results. In 2021, the company won the bid for the fourth batch of national centralized procurement of drugs for perindopril TERT butylamine tablets and pregabalin capsules; Atorvastatin calcium tablets, losartan potassium tablets and lisinopril tablets won the bid for joint centralized procurement of 13 provinces in Guangdong, Jiangsu and Shandong. At present, the company has approved the listing of 7 preparation products in China, and 8 products are in the CDE review: including gliclazide sustained-release tablets, isoniazid tablets (generic drug consistency evaluation), valsartan hydrochlorothiazide tablets, rivaroxaban tablets, moxifloxacin hydrochloride tablets, vigliptin tablets, etc. Valsartan amlodipine tablets, amlodipine atorvastatin calcium tablets, bisoprolol fumarate tablets, propofol tenofovir fumarate tablets, engliejing tablets, dagliejing tablets, cigliptin metformin tablets and clopidogrel bisulfate tablets are in the formal be test stage, and more than 30 products are under research.
The customer structure of API business has been continuously optimized and the variety has been continuously enriched. In 2021, the company’s API business achieved a revenue of 748 million yuan, a year-on-year decrease of 21.5%, and the gross profit margin decreased by 3.61 PCT to 35.68%, mainly due to exchange gains and losses, the impact of the epidemic on drugs in the field of chronic diseases, the rise in the price of upstream raw materials and the pace of delivery and transportation. In 2021, the company continued to explore new customers under the condition of continuously strengthening in-depth cooperation with existing major customers. The company has entered the project stage with a number of core varieties and global multinational pharmaceutical giants, and has conducted in-depth substantive cooperation and communication with many top 100 pharmaceutical enterprises in China, especially Zhengda Tianqing, Haisco Pharmaceutical Group Co.Ltd(002653) , Zhuzhou Qianjin Pharmaceutical Co.Ltd(600479) , etc. In terms of overseas customers, the company has actively explored channels and cultivated new customers, especially established contacts with the top 10 customers in major API demand countries such as Brazil and Mexico, such as Brazil brainpharm and EMS, and reached a certain milestone breakthrough. In terms of varieties: at present, there are 43 varieties of API under development, of which 14 have changed production, 11 varieties have been submitted to overseas market registration and certification, and 8 varieties have been submitted to China CDE registration; In 2021, valsartan (new process) and clopidogrel bisulfate crystal form II won the EU CEP certificate; Atorvastatin calcium, losartan potassium, vigliptin and apixaban passed the review and approval of China. As of April 2022, another three APIs, clopidogrel bisulfate crystal form II, mirtazapine and rivaroxaban, have passed the review and approval of China.
The overall performance of the company increased steadily. In 2021, the company achieved a revenue of 1.258 billion yuan, a year-on-year increase of 5.43%; The net profit attributable to the parent company was 143 million yuan, a year-on-year decrease of 8.62%; Net profit after deduction of non return to parent was 126 million yuan, with a year-on-year increase of 56.46%. The net profit attributable to the parent company decreased year-on-year, mainly due to the profit and loss of 851294 million yuan recognized by the company’s sale of 13.5% equity of Zhejiang Huishi pharmaceutical in 2020. In 2021, the company’s comprehensive gross profit margin was 37.29%, an increase of 0.84pct over the previous year, mainly due to the increase in the proportion of cdmo and preparation business with high gross profit, which increased the overall gross profit margin of the company.
The performance in the first quarter of 2022 exceeded expectations, and the comprehensive gross profit margin increased rapidly. In the first quarter of 2022, the company achieved a revenue of 500 million yuan, a year-on-year increase of 47.86%, reaching nearly 40% of the annual revenue in 2021; The net profit attributable to the parent company was RMB 115 million, with a year-on-year increase of 128.94%, reaching 80% of the net profit attributable to the parent company in 2021. The company’s performance in the first quarter exceeded expectations, mainly due to the rapid growth of cdmo and preparation business sales, with sales growth rates of 296.09% and 50.87% respectively. In the first quarter of this year, the company’s comprehensive gross profit margin reached 40.49%, an increase of 3.2pct compared with the end of 2021. On the one hand, the cdmo and preparation business arranged by the company in the early stage grew strongly; On the other hand, the large-scale effect of some products is significant, and the gross profit margin space is further broken through.
Investment suggestions:
We estimate that the net profit attributable to the parent company from 2022 to 2024 will be RMB 328 / 397 / 483 million respectively, EPS will be RMB 2.17 / 2.62 / 3.19 respectively, and the current share price corresponds to 21 / 17 / 14 times of PE. Considering that the company’s cdmo business and preparation business have entered a rapid and large-scale stage, and the transformation and upgrading have been accelerated; We maintain its “buy” rating.
Risk tips:
The heavy volume of key cdmo orders is less than expected; Price fluctuation risk of APIs and intermediates; Environmental protection policy risk; Safety production risk.
