\u3000\u30 Xuchang Ketop Testing Research Institute Co.Ltd(003008) 71 Hvsen Biotechnology Co.Ltd(300871) )
Focusing on veterinary drugs for 20 years, veterinary chemical drugs account for more than 80%.
Hvsen Biotechnology Co.Ltd(300871) was founded in 2002. Since its establishment, it has focused on the field of animal health care, and its business covers the fields of veterinary drug preparations and veterinary API; In 2021, the company's revenue was 996 million yuan, with a compound annual growth rate of 25.6% from 2017 to 2021; Among them, veterinary chemicals are the core products of the company, accounting for more than 80% of the revenue. The company's products are mainly sold in the Chinese market, accounting for 98.7% in 2021; Among them, East China is the largest sales market, with a sales revenue of 337 million yuan in 2021, accounting for 33.82%. The company takes pig medicine as the core, accounting for about 80%. At the same time, it has also expanded in other animal medicine fields such as poultry, aquatic products and pets, and enriched its business structure.
Policies have helped the veterinary drug market expand continuously, and the veterinary drug industry has started the process of centralization.
In recent years, the national industrial policy support has played an important role in promoting the development of the veterinary drug industry. With the implementation of the new version of veterinary drug GMP and GSP, new requirements have been put forward for veterinary drug enterprises from production to operation, and China's veterinary drug market has gradually become standardized. In 2020, the sales scale of veterinary drug products in China was 62.1 billion yuan, with an average annual compound growth rate of 8.6% from 2009 to 2020.
According to the national pig production development plan (20162020) issued by the Ministry of agriculture and rural areas, China's breeding industry began to develop towards large-scale breeding. In 2020, the large-scale rate of pig breeding reached 57%, an increase of 4% year-on-year. The intensive trend of the breeding industry has promoted large-scale breeding enterprises to form a close cooperative relationship with advantageous veterinary drug enterprises. In 2020, the company's group customers achieved a sales revenue of 432 million yuan, a year-on-year increase of 112.68%, and the number of group customers increased by 67; In 2021, the company's group customer revenue increased by 41.03% year-on-year, with 449 new direct sales customers.
The market for veterinary drugs is promising.
Since the outbreak of non plague in August 2018, the pig breeding industry has been hit hard, and the company began to gradually expand the poultry drug business. In 2019, China's poultry market increased by 11.9% year-on-year, and the stock at the end of the year increased by 8.0% year-on-year. The number of poultry veterinary drugs purchased by breeding enterprises increased significantly. The company's revenue from poultry drugs in 2019 was 54.778 million yuan, with a year-on-year increase of 757%. In 2020 and 2021h1, the operating revenue of poultry sector has accounted for nearly 10%.
In recent years, China's pet medical industry has developed vigorously. The scale of pet medical market is about 40 billion, accounting for 20% of the whole pet industry. In recent three years, the average annual compound growth rate has reached 20%. Pet medicine is the core of pet medicine, with a scale of 10.5 billion. At present, the market penetration of pet medicine in China is low, and the share of pet medicine accounts for less than 3% of the sales of veterinary medicine. At present, the company has 9 new drugs under development for pets. In 2021, it set up a research and development team of more than 20 people to focus on the field of pet medicine. With the increase of people's income and the development of China's pet medical industry, pet medicine is expected to become a new driving force for the company's future performance growth.
Raise funds to expand production, improve the layout, and build competition barriers for core technologies
With the continuous increase of the company's core product tylosin revenue, the production capacity is close to saturation. In 2022, the company issued 700 million yuan of convertible bonds to raise funds and expand production. It plans to build an expansion project of tylosin production line with an annual output of 1000 tons and tylosin production line with an annual output of 600 tons. It is expected to be put into operation in June 2022 and March 2022 respectively, becoming a new growth point of the company in the future.
At present, the company has 65 R & D projects, including 25 new drugs under research. In 2021, the company obtained the new veterinary drug certificates of teloxacin (class II), teloxacin injection (class II) and gongamaran Zhili powder (Class III), and newly authorized 7 invention patents; The company added 15 R & D personnel, and the R & D investment reached 468876 million yuan, a year-on-year increase of 65.2%.
Investment advice
We predict that from 2022 to 2024, the company will realize operating revenue of 815 million yuan, 970 million yuan and 1233 million yuan; The year-on-year growth rates were - 18.2%, 19.1% and 27.0% respectively. The corresponding net profits attributable to the parent company were 110 million yuan, 136 million yuan and 187 million yuan, and the corresponding EPS were 0.66 yuan, 0.82 yuan and 1.12 yuan respectively. With the price of upstream API falling and stabilizing in the normal range in 2022, the cost side pressure of the company is expected to be reduced and the profitability will be improved. We expect that from 2023, the prosperity of pig breeding industry is expected to rise, and the demand for veterinary drugs will recover. Based on the company's expected eps0.5 in 202266 yuan, now give the company 30 times PE, and give a "buy (first time)" rating corresponding to the reasonable valuation of 19.8 yuan of the target price.
Risk tips
Downstream industry demand fluctuation risk; Risk of sharp fluctuations in raw material prices in upstream industries; Animal disease risk; The transformation of the new version of veterinary drug GMP has an impact on production and operation activities, as well as the risk that the existing production line fails to pass the acceptance of the new version of veterinary drug GMP in time.
