\u3000\u30 Guangdong Tengen Industrial Group Co.Ltd(003003) 63 Porton Pharma Solutions Ltd(300363) )
Matters:
The company announced the first quarterly report of 2022: Q1 achieved a revenue of 1.443 billion yuan (+ 165.77%), a net profit of 382 million yuan (+ 333.53%), and a net profit of 381 million yuan (+ 406.20%) after deduction. The profit growth rate is higher than the previous forecast range.
Ping An View:
Large orders helped the rapid growth of core business and significantly improved the profit margin
The company's core business small molecule chemical cdmo achieved a revenue of 1.433 billion yuan (+ 173%) during the reporting period. Behind the high growth is the gradual delivery of large orders and the continuous expansion of other project pipelines. It is speculated that the delivery of the company's large order Q1 is relatively small, and it is expected to contribute more revenue in each quarter in the future. The overall gross profit margin of Q1 company was 48.94% (+ 8.55pp), which was greatly increased because the gross profit margin of large orders was higher than previously expected, combined with the improvement of the overall operation efficiency of the company.
On the other hand, large orders bring additional scale effect. During the reporting period, the company's management expense rate (6.69%, - 3.30pp) and R & D expense rate (7.27%, - 4.83pp) decreased significantly, while the sales expense rate (3.68%, + 1.03pp) increased due to the payment of BD employee Commission. Based on the above factors, the attributable net profit of the company was 382 million yuan (+ 334%), excluding the impact of emerging businesses, the attributable net profit was 416 million yuan (+ 290%), and the growth rate far exceeded that of the revenue end.
Emerging businesses continue to increase, and the reserves are completed and enter the expansion period
After the establishment of the core team, the company's two emerging businesses entered the expansion period, and employees, customers and projects continued to increase. The number of employees reached a new high, including 324 CGT cdmo employees, an increase of 10% over the end of 2021; Preparation cdmo has 178 employees, an increase of 14% over the end of 2021.
The number of new customers and projects also increased, including 22 new customers (7 in the same period of last year) and 26 new orders (9 in the same period of last year) signed by CGT cdmo during the reporting period; During the reporting period of preparation cdmo, 22 new customers (9 prices in the same period of last year) and 30 new orders (10 in the same period of last year) were signed.
In 2022q1, the company's CGT cdmo achieved a revenue of 7.85 million yuan (13.87 million yuan in 2021), and the preparation cdmo achieved a revenue of 1.57 million yuan (2016 million yuan in 2021). In 2022q4, the capacity of these two emerging businesses will be further expanded, and we can expect sustained and rapid growth in the future.
Launch stock incentive plan to show confidence
The company launched the restricted stock incentive plan in late April and plans to grant 7.14 million restricted shares (accounting for 1.31% of the total share capital) to the incentive objects. The number of people involved reached 212, including directors, senior executives, middle managers, core backbones and special contributors. The performance assessment objectives of the plan deserve special attention: from 2022 to 2024, the growth of the company's attributable net profit will not be lower than 190%, 220% and 260% in 2020. We believe that this means that the management of the company has fully considered the possible performance fluctuation caused by the change of large order demand, and formulated the assessment objective on this basis, which shows the management's confidence in the industry and the long-term sustainable development of the company.
Maintain a "recommended" rating. Recently, the secondary market panicked the cdmo industry and companies due to the small amount of paxlovid issued in the overseas market. We believe that the market value related to covid-19 in the current market value of the company is very small. Investors should pay more attention to the overall industry transfer trend and the effect of the company's business and capacity expansion. Maintain the EPS forecast of 2.62, 2.97 and 3.73 yuan from 2022 to 2024, and maintain the "recommended" rating.
Risk tips: 1) if the investment and outsourcing ratio of global innovative drugs is lower than expected, it will affect the development of CMO industry; 2) The failure of drug research and development, the early termination of the project, or the sales of drugs after listing are less than expected, which may lead to the failure of large-scale production of corresponding orders; 3) Production accidents and warning letters from regulatory authorities may lead to the loss of orders and even customers; 4) Exchange rate fluctuations may cause exchange losses.
