\u3000\u3000 Novogene Co.Ltd(688315) (688315)
Novogene Co.Ltd(688315) announce the performance forecast for 2021. It is estimated that the net profit attributable to the parent company will be 190 million yuan to 228 million yuan in 2021, with a median of 209 million yuan, a year-on-year increase of 420% – 524%; It is expected to realize a net profit of 150 million yuan to 180 million yuan, with a median of 165 million yuan, a year-on-year increase of 580% – 716%. Quarterly: it is estimated that the net profit attributable to the parent company in 2021q4 will be 61-99 million yuan, with a median of 80 million yuan, a year-on-year increase of – 31.36% – 11.44%; It is expected to realize a net profit of 51-81 million yuan after deduction, with a median of 66 million yuan.
Viewpoint: under the disturbance of domestic and foreign epidemics, the company’s performance is under pressure, the profit margin is significantly improved, the prosperity of scientific research and sequencing industry is high, and the backlog of sequencing demand is expected to be gradually released in the follow-up, looking forward to returning to normal high growth. Novogene Co.Ltd(688315) focuses on providing “real-time” scientific research gene sequencing services, which is different from product companies. We believe that the impact of the epidemic on the company’s business is mainly reflected in: 1) clients: the pace of sample preparation in major scientific research institutes and laboratories slows down, and the performance release is limited due to insufficient capacity utilization; 2) Sales side: new customer development faces great challenges. The epidemic situation at home and abroad is strictly controlled, and it is difficult for the company’s salesperson to attend offline meetings, visit and develop new customers, which limits the release of performance to a certain extent.
The profitability continued to improve and the scale effect appeared. The gross profit margin of 21q3 was 44.10%, up 7 PCT year-on-year and 5.4 PCT month on month. The gross profit margin increased significantly. We expect Q4 to continue this good trend. The improvement of profitability is mainly due to the reduction of labor cost, the improvement of capacity utilization after the expansion of business scale and the dilution of fixed cost after the launch of Falcon and other automated flexible delivery systems.
We are optimistic about Novogene Co.Ltd(688315) ‘s leading position in the field of scientific research level gene sequencing services. The company’s investment logic is summarized as follows: 1) competitive advantage: scale effect + know how precipitation + automation and intelligence help reduce costs and increase efficiency, and build a high competitive moat. The company occupies about 30% of the market share of scientific research gene sequencing in China and about 5% of the global market share, and is the leader of scientific research gene sequencing; 2) Growth space: (1) China: increased market share of scientific research ngs sequencing + rich categories in scientific research fields (protein / metabolite spectrum detection) + expansion of clinical applications (tumor detection / Health Management); (2) Overseas: the increase in outsourcing rate has led to the increase in the market share of scientific research ngs sequencing, with broad overseas growth space.
Profit forecast and investment suggestions: it is estimated that the net profit attributable to the parent company from 2021 to 2023 will be 215 million yuan, 268 million yuan and 402 million yuan, with a year-on-year increase of 489%, 25% and 50% respectively, and the corresponding PE will be 65x, 52X and 35x respectively. Excluding the impact of amortization of equity incentive expenses, it is expected to realize net profits of 235 million yuan, 304 million yuan and 419 million yuan respectively from 2021 to 2023, with a year-on-year increase of 544%, 29% and 38% respectively. Maintain the “buy” rating.
Risk warning: the impact of the epidemic on business development at home and abroad is less than expected; Industry competition intensifies risks.
