Key investment points:
The CXO sector may have bottomed out after the correction, and the value of the sector is prominent: from June 30, 2021 to now, the CXO sector has fallen 36.9%, and the correction is significant. The valuation of the sector has been reduced to 52.6 times, and the average valuation in 21 years is 93 times, up to 130 times. The current valuation has returned to a reasonable range, and the investment value is prominent. From the perspective of fund positions, among the top ten pharmaceutical stocks with heavy positions in 2022q1 public funds, CXO company has 5 companies, accounting for half of the country, of which Wuxi Apptec Co.Ltd(603259) 2022q1 heavy positions have a market value of 71.5 billion, ranking first among the pharmaceutical heavy positions of public funds.
From 2021 to 2022q1, the performance is beautiful, and many indicators show the high prospect of the industry: A-share CXO company achieved a total revenue of 56.6 billion yuan in 2021, a year-on-year increase of 43.4%, and a net profit attributable to the parent company of 13.52 billion yuan, a year-on-year increase of 62.3%; In 2022q1, the revenue was 19.58 billion, with a year-on-year increase of 72.4%, and the net profit attributable to the parent company was 3.93 billion, with a year-on-year increase of 36.1%. The operating efficiency improved significantly, the overall parent net profit margin of the sector increased by 2.8pct, the sales / management / financial expense ratio decreased by 0.4pct/1.4pct/2.5pct respectively, and the scale benefit of the industry became more and more obvious. In addition, the head CXO company has sufficient orders, the number of employees is rising, capital expenditure, fixed assets and projects under construction are significantly improved, production capacity continues to expand, and the CXO industry continues to have a high outlook.
The popularity of new drug research and development has not decreased, and the demand of CXO industry is strong: in 2021, the total investment and financing in biomedical field was nearly 369.91 billion, with a year-on-year increase of 31.7%, and the number of investment and financing events reached 1273, with a year-on-year increase of 34%. Although the investment and financing amount in 2022q1 declined slightly, the overall level is still at a historical high, and the industry popularity has not decreased; Global and Chinese new drug R & D investment continues to rise, and it is expected that the scale of global new drug R & D investment will exceed US $200 billion in 2022; New drug clinical projects have reached new highs, and the number of ind in China has reached 47% in recent three years.
Investment suggestion: CXO enterprises have benefited from the wave of innovative drug research and development in China. From 21 to 22q1, the performance of China’s CXO company has maintained high growth, sufficient orders, continuous expansion of production capacity, the prosperity of the industry remains the same, and the future performance is uncertain. At the same time, the development of new technologies will also drive the industry to maintain rapid growth. In recent years, disturbed by domestic and foreign policy uncertainty + short-term investment and financing and other factors, the valuation of CXO industry has been adjusted to a historical low, and the investment value is prominent. Suggestions: 1) first line cdmo with strong performance certainty: including Wuxi Apptec Co.Ltd(603259) , Asymchem Laboratories (Tianjin) Co.Ltd(002821) and Porton Pharma Solutions Ltd(300363) etc; 2) Innovative CXO enterprises with layout of cell gene therapy: including Wuxi Apptec Co.Ltd(603259) , Porton Pharma Solutions Ltd(300363) , Kingsley biotechnology, and metabiology.
Risk tips: China’s foreign policy risks, intensified industry competition, investment and M & A are less than expected, and the growth of industry demand is less than expected.
