1. Share price & Valuation: local leaders have outstanding cost performance
Stock price: obvious differentiation, policy + investment and financing disturb valuation.
Valuation: the local CXO fell back to the beginning of 2019. The growth of local leaders is better, and the valuation cost performance has exceeded that of overseas leaders.
2. Demand & Supply: orders grow rapidly and supply accelerates
Demand: orders on hand have accelerated, and the growth of Wuxi Apptec Co.Ltd(603259) , Asymchem Laboratories (Tianjin) Co.Ltd(002821) equivalent ratio has exceeded 60%, supporting the continued high growth of revenue.
Employees & capex: from 2020 to 2021, many CXOs expanded their personnel significantly. From 2022 to 2023, it is still the node of significant increase in capital expenditure, and the capacity supply is expected to accelerate.
3. Operation & operation: prepare for orders and improve operation efficiency
Operating efficiency: from 2021 to 2022, the turnover rate of fixed assets and inventory of some companies decreased, mainly due to the impact of large order preparation and production expansion, and the turnover rate of accounts receivable of most companies increased, indicating the trend of industry bargaining power. We believe that the acceleration of capital expenditure under the background of the improvement of operating efficiency has laid the foundation for the continuous improvement of operation from 2022 to 2024.
Human efficiency: the data from 2021 to 2022 show that human efficiency is in the trend of improvement. At the same time, Pharmablock Sciences (Nanjing) Inc(300725) , Fangda holdings, etc. are in the period of rapid expansion of new businesses, and the difference of business structure will also bring great differences in human efficiency.
Profitability: the 20212022q1 data show that the leading gross profit margin is high and increases rapidly. New business expansion / large-scale production capacity investment reduced the gross profit margin of some CXO leaders, and it is still expected to recover in the future. Net interest rate: the improvement of operating efficiency / the decrease of expense rate, the driving of high profitability business and the improvement of large-scale benefits have driven the improvement of the profitability of leading enterprises, and there is still room for improvement.
4. Investment suggestions
Buy growth CXO: the valuation is cost-effective, and Wuxi Apptec Co.Ltd(603259) , Asymchem Laboratories (Tianjin) Co.Ltd(002821) , Porton Pharma Solutions Ltd(300363) , Zhejiang Jiuzhou Pharmaceutical Co.Ltd(603456) , etc. are recommended.
Buy flexible CXO: Pharmaron Beijing Co.Ltd(300759) , Joinn Laboratories (China) Co.Ltd(603127) , Shanghai Medicilon Inc(688202) , Heyuan biology;
Buy CXO of the industry: Hangzhou Tigermed Consulting Co.Ltd(300347) , Heyuan biology, Porton Pharma Solutions Ltd(300363) .
5. Risk warning
The risk of investment and financing cycle is lower than the expected volatility of China’s new market.
