\u3000\u3 Guocheng Mining Co.Ltd(000688) 222 Hitgen Inc(688222) )
Key investment points
Event: 1) on April 28, 2022, the company released its annual report for 2021. In 2021, the company realized an operating revenue of 311 million yuan, a year-on-year increase of 27.69%; The net profit attributable to the parent company was 63.38 million yuan, a year-on-year decrease of 1.00%; The net profit deducted from non parent company was 23.3 million yuan, a year-on-year decrease of 45.74%. 2) The company released the first quarterly report of 2022. In the first quarter of 2022, the company realized an operating revenue of 72.47 million yuan, a year-on-year increase of 4.77%; Net profit attributable to parent company -7.09 million yuan; Deduct net profit not attributable to parent company – 10.39 million yuan.
The main business continued to recover. After excluding the impact of milestone income in the same period, the performance was strong in 2021. 2022q1 fluctuated slightly due to the rhythm of order delivery and increased R & D investment. At the end of 2020, the company received a milestone down payment of 38 million yuan for the transfer of hg030 Chinese equity. Excluding the additional benefits brought by the transfer, the revenue reflecting the real recovery in 2021 was + 51.29% year-on-year, the parent company was + 143.57% year-on-year, and the deduction was + 371.74% year-on-year. The main business recovered strongly. In 2022q1, the operating income is 72.47 million yuan (+ 4.77%), which is – 7.09 million yuan to the parent and – 10.39 million yuan to the deduction. We expect that: ① the company’s customers mainly come from overseas, the order delivery rhythm is generally low in the first quarter and high in the second quarter, and there is less delivery in the first quarter; ② Most of the company’s commercial projects in China are one-stop customized services for new drugs, and the corresponding gross profit is relatively low at present; ③ The continuous development of technology platforms such as protein degradation, the continuous increase of R & D investment and the continuous increase of R & D expense rate in 2022q1. In terms of gross profit margin, it comes from ① vernalisr & D is still in the integration period. With the gradual expansion of its income scale, the overall gross profit margin is reduced; ② China’s gross profit margin is low, and the one-stop new drug customization service business continues to grow, with a gross profit margin of 47.02% (- 32.34pp) in 2021 and 34.89% (- 13.37pp) in 2022q1.
The multi technology platform has been gradually improved, and the value of new drug pipeline has been continuously improved. 1) New drug R & D services: the revenue in 2021 was 307 million yuan (+ 49.46%). In 2021, the types of small molecules in del library exceeded 120 billion, and the types of synthetic molecular skeletons increased to more than 6000. By the end of 2021, the company had screened 47 different targets, and the overall success rate of the project was more than 80%, higher than the average level of high throughput screening (HTS). In 2021, a total of 16 projects have completed the transfer of compound intellectual property rights, and the milestone fee can be obtained according to the contract. Relying on del, FBDD / SBDD and other technologies, the company has built a protein degradation platform and a new nucleic acid drug research and development platform, and continued to expand new drug development fields horizontally. ① Protein degradation platform: biological evaluation including protac library design, synthesis, screening and ternary complex formation experiment; ② Nucleic acid platform: the design, synthesis, modification of siRNA and the evaluation of most biological functions in vivo and in vitro are basically complete, and the most critical delivery technology is also being developed independently. With the continuous improvement of the new technology platform, it is expected to gradually contribute new increment. 2) In terms of equity transfer of new drug projects, the company’s new drug project department is in the early stage of clinical practice, but the product positioning is clear and the differentiation is significant. By the end of 2021, hg146, hg030 and hg381 have been clinically approved. We expect that with the gradual extension of the project pipeline to the back end, the project value will continue to expand, and the performance flexibility brought by the transfer of new drug projects is expected to continue to improve.
Profit forecast and investment suggestions: we expect the company’s revenue to be RMB 400, 519 and 676 million from 2022 to 2024 (about RMB 410 and 554 million from 2022 to 2023 before adjustment), with a year-on-year increase of 28.51%, 29.75% and 30.32%. Considering that the company’s investment in post clinical R & D of new drug projects may continue to increase, which may lead to slight fluctuations in the cost rate, We estimate that the net profit attributable to the parent company from 2022 to 2024 will be 81 million yuan, 103 million yuan and 134 million yuan (about 85 million yuan and 118 million yuan in 20222024 before adjustment), with a year-on-year increase of 27.59%, 27.88% and 29.54%. The company is the world’s leading drug discovery cro company; There are abundant reserves of new drug R & D pipelines, which are expected to continue to transform, drive the improvement of performance flexibility and maintain the “buy” rating.
Risk warning events: the public information used in the research report may have the risk of information lag or untimely update, the risk that the business recovery after covid-19 epidemic is not as expected, the risk of uncertainty in the external transfer of new drug projects, the risk of relative concentration of customers, and the risk of loss of core technicians.
