\u3000\u3000 Zhejiang Jiuzhou Pharmaceutical Co.Ltd(603456) (603456)
Event overview
Recently Zhejiang Jiuzhou Pharmaceutical Co.Ltd(603456) released the performance forecast for 2021: the company expects to realize a net profit attributable to the parent company of 609 million yuan – 685 million yuan in the whole year, with a year-on-year increase of 60% – 80%; It is estimated that the annual net profit deducted from non parent company is 608 million yuan to 685 million yuan, with a year-on-year increase of 65% – 85%.
The performance has maintained rapid growth, and the driving force of cdmo has increased day by day
The company announced that the annual net profit attributable to the parent company is expected to be 609-685 million yuan, with a year-on-year increase of 60% – 80%, and the median value of the range is 647 million yuan, which is in line with our previous expectations. In terms of quarters, Q4 is expected to realize a net profit attributable to the parent company of 136 million yuan to 212 million yuan, with a median value of 174 million yuan. Calculated according to the median value, it has a year-on-year increase of 24% and a slight decrease in ring ratio, which belongs to normal inter quarter fluctuations. The main performance driving force of the company comes from the high growth of cdmo business. Through the acquisition of new production capacity and the extension to the preparation end, the driving force of cdmo is increasing day by day.
The vitality of heavy products is still strong, and the pipeline support business is growing rapidly
Novartis’ anti heart failure product, nuoxintol, is the core product in the company’s cdmo business. The approval of new indications for heart failure supports its vigorous vitality. According to the third quarterly report data of Novartis, in the first three quarters of 2021, Novartis achieved a sales revenue of US $2.6 billion, a year-on-year increase of 41%, and the terminal showed a rapid and large-scale trend. Following the acquisition of Novartis Suzhou plant, the company successively acquired Teva Hangzhou plant and Nanjing kangchuanji pharmaceutical in the second half of 2021. With sufficient capacity, the company will further open the “ceiling” of cdmo business and gradually establish an integrated platform from intermediate to API to preparation. In terms of customer structure, the cooperation relationship between the company and Roche and other large multinational pharmaceutical enterprises is also constantly strengthened, and the cooperation with China biotech is also in a leading position. In the future, the company’s cdmo business is expected to achieve sustained and rapid growth in a long cycle.
The characteristic API business grew steadily and continued to contribute to stable profits
Characteristic API is the company’s traditional business. In 2019, Jiangsu Ruike, a subsidiary, stopped production, resulting in a decline in revenue. Production has resumed in June 2020 and began to contribute profits in 2021. At present, the company’s characteristic API business continues to add new varieties on the basis of the original varieties, and the subsequent reserve varieties are rich. It is expected that with the steady growth of the company’s old varieties and the gradual increase of new varieties, the company’s characteristic API business is expected to maintain steady growth.
Investment suggestion: as an excellent example of the successful transformation of API into cdmo, the company has a close relationship with downstream pharmaceutical enterprises, with strong support for new M & a capacity and sufficient backup pipeline. It is expected that the net profit attributable to the parent company from 2021 to 2023 will be 667 million yuan, 849 million yuan and 1074 million yuan respectively, with a year-on-year increase of 75.3%, 27.2% and 26.5%, maintaining the “recommended” rating.
Risk tip: increased competition leads to decreased profitability, exchange gain and loss risk, etc.
