\u3000\u3 China Vanke Co.Ltd(000002) 250 Lianhe Chemical Technology Co.Ltd(002250) )
The revenue of plant protection business has increased significantly, and the project reserves at all stages of pharmaceutical business are abundant. Maintain buy rating.
Key points supporting rating
The performance is close to the previous forecast ceiling. The company released its 2021 annual report. In 2021, it achieved an operating revenue of 6.587 billion yuan, a year-on-year increase of 37.75%; The net profit attributable to the shareholders of the listed company was 315 million yuan, a year-on-year increase of 186.65%, and the net profit after deducting non recurring profits and losses was 288 million yuan, a year-on-year increase of 357.20%. In the fourth quarter, the operating revenue in a single quarter was 1.847 billion yuan, a year-on-year increase of 36.06%, the net profit attributable to the parent was 38 million yuan, a year-on-year increase of 133.94%, and the net profit attributable to the parent after deduction was 41 million yuan, a year-on-year increase of 128.91%. In the first quarter of 2022, the company realized an operating revenue of RMB 1.693 billion, with a year-on-year increase of 18.50%, and the net profit attributable to the parent company was RMB 74 million, with a year-on-year decrease of 11.71%. The net profit attributable to the parent company after deduction was RMB 53 million, with a year-on-year decrease of 27.60%.
Jiangsu Lianhua production line basically resumed production, and the rise in raw material prices eroded the profits of plant protection cdmo business. In 2021, the income from plant protection business was 4.277 billion yuan, a year-on-year increase of 57.86%. In 2021, the epidemic situation in China was effectively controlled, the demand outside China recovered steadily, the company’s operation progressed steadily, and the cooperation with agrochemical / plant protection giants was further strengthened. On the other hand, the company’s subsidiaries Jiangsu Lianhua and Yancheng Lianhua were temporarily suspended due to the explosion of Xiangshui 3.21. As of December 31, 2021, 20 production lines of Jiangsu Lianhua and Yancheng Lianhua, subsidiaries of the company, have resumed production. In August 2021, Jiangsu Lianhua absorbed and merged Yancheng Lianhua. In 2021, Jiangsu Lianhua (after merger) realized an operating revenue of 1.155 billion yuan, laying the foundation for the recovery and sustainable growth of subsequent plant protection business. In addition, according to the company’s announcement on April 29, the pricing of cdmo business is a cost plus model, and the gross profit is relatively stable. After the price of raw materials rises, the gross profit will decline accordingly. In 2021, the gross profit margin of plant protection business was 22.98%, down 8.5% year-on-year. With the further deepening of the company’s cooperation with customers and the recovery of Jiangsu Lianhua’s order volume, it is expected that the company’s profitability will pick up.
The number of pharmaceutical business projects continued to grow. In 2021, the revenue of pharmaceutical business was 1.217 billion yuan, with a year-on-year increase of 22.02%. The cooperation between the company and existing strategic customers has been deepened. With the listing of validation products in the previous two years, the number of commercialized products has increased, which has promoted the continuous growth of pharmaceutical business revenue. In addition, in 2021, the company actively developed the business of major customers and small and medium-sized pharmaceutical companies, and accepted 7 customer audits; Completed the process validation of more than 8 new molecular registered intermediate and API projects. The company is in the commercialization stage in 2021, with 17 products and another 102 products in the clinical stage. In addition, both Jiangkou factory and British factory have passed the FDA audit, Jiangkou factory has passed the EU EMA audit, and Taizhou Lianhua has passed the GMP inspection. With the continuous promotion of these projects, the pharmaceutical business is expected to maintain a high growth rate.
Valuation
Affected by the rising cost and covid-19 epidemic, the profit forecast is lowered. It is expected that the earnings per share in 20222024 will be 0.46 yuan, 0.78 yuan and 0.94 yuan respectively, and the corresponding PE will be 28.5 times, 17.0 times and 14.1 times respectively. Considering that the revenue growth maintains a good momentum, and there are still many products completed and put into operation in the future to contribute to the performance, the buy rating is maintained.
Main risks of rating
The epidemic risk of the company’s location, the verification risk of pharmaceutical projects, and the price of raw materials fluctuate greatly.
