Chinese CXO enterprises showed a high degree of prosperity in 2021, and inventory level, contract liabilities and orders also laid the foundation for growth in 2022. The industry valuation has entered the rebalancing period after the bubble squeeze, and the industry investment has entered the stage of intensive selection. The leading company is expected to undertake more orders and more complex businesses with the advantage of technology.
After the bubble extrusion, the industry has entered the period of valuing rebalancing, and investment has entered the stage of fine selection. The CXO industry has entered the rebalancing period after the bubble squeeze valuation. According to the stock price and profit expectation as of January 13, 2022, the expected price earnings ratio of the main companies in the CXO industry based on the 2022 profit expectations is about 60. If the average annual compound growth rate of major companies in the industry is 20% from 2023 to 2025, the average annual compound growth rate is expected to be about 25% from 2022 to 2025 and peg is expected to be about 2.5 in 2022. If the average annual compound growth rate of major companies in the industry is 30% from 2023 to 2025, the average annual compound growth rate is expected to be about 30% from 2022 to 2025 and peg is expected to be about 2 in 2022. If the average annual compound growth rate of major companies in the industry can reach 40% from 2023 to 2025, the average annual compound growth rate is expected to reach about 35% – 40% from 2022 to 2025, and peg is expected to reach about 1.5 in 2022. The industry investment is expected to enter the period of “careful selection”, and CXO enterprises with core competitiveness need to be selected for investment. Leading companies with core technologies are expected to undertake more orders by virtue of their advantages, while companies with low competitiveness in the industry will face the problem of reduced overall growth.
The prosperity of CXO industry continues, and it is expected to maintain high growth in 2022. From Q1 to Q3 in 2021, China’s CXO enterprises showed excellent year-on-year growth in revenue and profit. The inventory level and contract liability level at the end of Q3 also increased compared with the same period last year, laying the foundation for the performance boom in 2022. Both Asymchem Laboratories (Tianjin) Co.Ltd(002821) and Porton Pharma Solutions Ltd(300363) are subject to large orders from overseas pharmaceutical enterprises, which will help the performance growth in 2022. Chinese CXO enterprises will actively carry out capacity building and team building in 2021 to release capacity, so as to improve their order taking capacity. The expected growth rate of China’s CXO industry is still higher than that of the global CXO industry, and Chinese CXO enterprises are expected to obtain a larger proportion of orders in the world. The popularity of biopharmaceutical sales and R & D has brought corresponding biocdmo services, and bio cdmo production capacity is still in the hands of a few leading enterprises. The number of biological drugs and the number of clinical trials of biological drugs in the approved number of China’s CDE class I new drugs ind show an upward trend, and China’s leading CXO enterprises have actively made corresponding layout.
The industry will face differentiation, and there are integration opportunities in the cdmo industry. After the income of China’s CXO industry reaches a certain scale, the overall CXO industry is expected to enter a differentiation stage. The global cdmo market is still relatively fragmented, there are a large number of small cdmo competitors, and there are opportunities for integration and growth in the industry. The number of cdmo enterprises with an annual revenue of more than US $500 million accounts for only 1% of the number of cdmo enterprises in the whole industry. In terms of market revenue share, cdmo enterprises with annual revenue of more than US $500 million account for 31% of the market share. Considering cost control, risk control including technology transfer and quality problems, and time saving, pharmaceutical enterprises tend to cooperate with a small number of cdmo, and the cdmo industry has the power to carry out industry integration. The leading cdmo company is expected to undertake more orders and more complex businesses in the chemical small molecule business, and increase its performance in emerging businesses such as biological macromolecules.
Main risks of rating
The risk of industry slowdown, the risk that the financing of innovative medicine industry is less than expected, the risk of international political changes and the risk of currency exchange rate changes.
