\u3000\u30 Guangdong Tengen Industrial Group Co.Ltd(003003) 47 Hangzhou Tigermed Consulting Co.Ltd(300347) )
Key investment points
Split: more than expected, covid-19 has drive
2022q1 performance: the company achieved revenue of RMB 1.818 billion (YoY 101.55%), net profit attributable to parent company of RMB 518 million (YoY 13.82%), and non net profit deducted of RMB 378 million (YoY 65.31%). The net cash flow from operating activities was 303 million (YoY 27.16%), indicating a strong operating quality. Q1's revenue side and deduction of non net profit exceeded our previous expectations. We expect that it is mainly due to the higher than expected recognition of covid-19 related clinical revenue + high growth of main business revenue.
Split: the main business is strong and is expected to be driven by large clinical and laboratory services
According to our previous prediction of covid-19 revenue recognition rhythm and business split, we expect that the clinical volume of covid-19 may be 400500 million in 2022q1, driving the high growth of the company's overall revenue. After deducting covid-19, the growth rate of main business revenue is expected to be 45% - 55%, showing a strong growth momentum. We expect that large clinical (order support), laboratory services (capacity release + order boom support, Hong Kong stock announcement Fangda holding revenue yoy51.7%) are still the main drivers of high income growth, and the revenue yoy of the two businesses is expected to exceed 50% +. With the support of high orders on hand (11.405 billion) at the end of 2021, we expect that the revenue growth level of Q1 is expected to continue in major clinical and laboratory services in 2022.
Profitability: the decline of interest income is a drag, and it is expected to increase throughout the year
In 2022q1, the gross profit margin was 38.83%, with a year-on-year decrease of 8.09pct. We estimate that it is mainly caused by the increase in the proportion of covid-19 passing rate. The deduction of non net interest rate was 20.79%, with a year-on-year decrease of 4.60pct, mainly due to the increase of financial expense rate of 5.23pct (caused by the expected year-on-year decrease of interest income), and the decrease of sales + Management + R & D expense rate of 7.39pct. We assume that with the expansion of investment business in 2022, the cash will decrease and the marginal contribution of interest income will decrease in 2022. However, with the decrease of 2022h2 contribution of covid-19 project (low gross profit margin) and the downward trend of other expense rate, we expect the non net profit margin to increase quarter on quarter in 2022.
Profit forecast and valuation
We expect the company's EPS to be 3.92, 4.61 and 5.66 yuan / share from 2022 to 2024. The closing price on April 26, 2022 corresponds to 23 times of PE in 2022 (20 times of PE in 2023). The company's valuation is at a historically low level and the leading barrier continues to be reflected. It is optimistic about the clinical cro market of innovative drugs in China and the future growth of Hangzhou Tigermed Consulting Co.Ltd(300347) as a leader, maintaining "buying".
Risk tips
The risk of deterioration of investment and financing of innovative drugs, the risk of fluctuation of clinical trial policies, the risk of new business integration falling short of expectations, and the risk of performance falling short of expectations.
