\u3000\u3000 Zhejiang Orient Gene Biotech Co.Ltd(688298) (688298)
Event: the company issued the performance forecast for 2021. In 2021, the net profit attributable to the parent company was 4.72 billion yuan to 5.12 billion yuan, with a year-on-year increase of 181.45% to 205.31%.
The performance in 2021 is in line with expectations, and the US orders in 2022 bring performance flexibility. Driven by the demand for covid-19 reagent, the company’s profit increased rapidly in 2021, and the net profit attributable to the parent company was RMB 4.72-5.12 billion, of which Q4 realized a net profit of RMB 800-1.1 billion. In the European market, although the prices in Germany, France and other markets decreased, the increase in the contribution of new orders from NIH in the UK offset some of the impact of the price reduction, and the company’s orders are still stable at US $1 / person, maintaining a high growth throughout the year. We expect that with the development of the company’s U.S. market in 2022, it is expected to provide performance growth elasticity higher than that in 2021.
Covid-19 is a pioneer in antigen detection and cooperates with Siemens to expand the global market. Zhejiang Orient Gene Biotech Co.Ltd(688298) is one of the earliest enterprises in China to develop covid-19 antigen rapid detection technology. In 2020, it started from covid-19 antibody detection, closely followed the changes of overseas epidemic prevention trend, launched antigen rapid detection technology, and became the first enterprise in China to obtain CE certification for covid-19 antigen rapid diagnosis. In the first half of 2021, the company achieved covid-19 antigen detection revenue of more than 6 billion yuan, accounting for about 14% of China’s export of covid-19 reagents. With stable quality advantages, the company’s antigen rapid diagnosis products have entered the UK NIH procurement list and become the main supplier in the UK market since the fourth quarter of 2021. On December 30, 2021, the covid-19 antigen self-test product developed by the company in cooperation with Siemens Medical won the EUA of FDA. After more than one year, the company became the third enterprise in China to obtain this approval.
The company actively explored the American market and entered the centralized order fulfillment period. In view of the current outbreak of omicorn strain infection, the United States has started the home testing program since January 2022. At present, 1 billion government orders have been confirmed. Considering that the epidemic situation in the United States is still continuing and there are many repeated infections caused by Omicron virus strain, according to the current population of 330 million in the United States, we expect that the monthly demand for covid-19 antigen detection in the United States will exceed 2 billion people in a single month, and its market scale is expected to exceed that in Europe. We expect that new orders will continue to be added in the subsequent U.S. market. Combined with the production capacity of the three FDA approved companies in China, Zhejiang Orient Gene Biotech Co.Ltd(688298) and Aikang biology are expected to obtain the remaining major order allocation.
It has multiple advantages of quality and production capacity and shares the order opportunities in the global market. Since 2020, the company has continued to expand its own capacity of diagnostic reagents and core antibody materials to achieve independent development and preparation. For manual packaging and other links that limit capacity efficiency, the company is also expanding recruitment. According to the current personnel allocation plan, we expect that the daily average unit yield of Q1 Zhejiang Orient Gene Biotech Co.Ltd(688298) in 2022 is expected to reach 15 ~ 20 million people, While meeting the British orders won the bid in the early stage, gradually supply and meet the new orders in the United States. The company adheres to the principle of independent production. Except that the upstream NC membrane and other materials are imported, the upstream core raw materials are independently prepared, and the reagent production process is still strictly managed. At the same time, the company’s products cooperate with Siemens, and the product quality has obtained multiple certifications.
Profit forecast and investment rating of the company: we expect the net profit of the company from 2021 to 2023 to be RMB 5.084 billion, RMB 9.381 billion and RMB 6.677 billion respectively, corresponding to EPS of RMB 42.37, 78.18 and RMB 55.64 respectively. The current share price corresponds to PE values of 9.71, 5.27 and 7.40 times from 2021 to 2023 respectively. We are optimistic about the company’s ability to undertake orders in the U.S. market. In the future covid-19 testing normalization stage, we are optimistic about the potential of the company’s cooperation with Siemens to jointly develop the global rapid testing market and maintain the “recommended” rating.
Risk warning: covid-19 diagnostic reagent export price reduction risk, uncertainty of orders in the US market and uncertainty of Siemens cooperation.
