Zhaoyan New Drug (603127) Annual Report Commentary: Performance Meets Expectations, Sustained High-speed Growth Can Be Expected

Event: The company released its 2018 annual report and achieved revenue in 20184.

09 million yuan, an increase of 35 in ten years.

69%, net profit attributable to mother 1.

08 million yuan, an increase of 41 in ten years.

72%; net profit after deducting non-attribution to mothers is 90.29 million yuan, an annual increase of 36.


Q4 single season, realized income 1.

65 ppm, an increase of 25 in ten years.

50%, net profit attributable to mother is 51.12 million yuan, an annual increase of 22.

33%; net profit after deducting non-return to mother is 46.85 million yuan, an annual increase of 25.


Views: 1. The main business continued to have high growth, and the performance was in line with expectations. In 2018, it realized revenue, net profit attributable to mothers and non-net profit after deductions were 4, respectively.

0.9 billion yuan, 1.

08ppm, 90.29 million yuan; the ten-year growth rate was 35.

69%, 41.

72%, 36.

92%, revenue and profit continued to grow rapidly, in line with our expectations.

The growth rate of non-returned net profit in 2018 was lower than the growth rate of net profit attributable to mothers. Firstly, the entrusted wealth management income increased significantly in 2017 to 7.97 million compared to 1.93 million in 2017.

In terms of quarters, the quarter-to-quarter revenue share of Q1 to Q4 2018 was 12 respectively.

6%, 20.

4%, 26.

6%, 40.

4%, net profit attributable to mothers is 8 respectively.

1%, 12.

6%, 32.

1%, 47.

2%, still showing a quarter-by-quarter increasing trend. In the second half of the year, orders were confirmed and confirmed, providing a major contribution to revenue and profits.

In terms of sectors, preclinical research continues to grow rapidly, providing major revenue contributions: long-term revenue from preclinical research4.

3.0 billion (+37.

97%), continued high growth, accounting for 98% of total revenue.

46% (+1.

62pp), providing 杭州桑拿网 major performance contributions.

We believe that the main driving force is that under the high prosperity of the CRO industry, the company, as the leader of safety assessment, improves production efficiency by improving and optimizing management processes, further exerts the scale effect of existing productivity and personnel, and continues to provide revenue contributions.

The company’s orders on hand continued to increase. At the end of the reporting period, the number of orders on hand was about 800 million, an annual increase of 19.

4%, which is much higher than the amount of income;

3.9 billion yuan, 27 relative to the beginning of the period.

03% steady growth.

Pre-clinical studies have initially achieved gross margins of 53.48% (-3.

24pp), we believe that the gradual reduction is due to the increase in the 深圳桑拿网 company’s staff and the increase in staff compensation leading to an increase in labor costs. The company added 145 new employees in 2018 (44 new employees in 2017), and most of them were direct business personnel.
The growth rate of laboratory animal sales has accelerated, and pharmacovigilance has started to contribute to income: the sales of laboratory animals has gradually achieved income of 487.

20,000 yuan (-45.

92%), gross margin of 27.

84% (-21.

40pp), the proportion of revenue growth and gross profit margin expansion, we believe that it is mainly the customer’s reduced expenditure and gradually realize the impact of animal reserves; transformation, the company’s new business expansion is smooth, the pharmacovigilance service team has begun to take shape, and has begun to contributeIncome, initially realized income 15.

770,000 yuan, this segment is still in the early stages, mature through business development, is expected to contribute new increments.

Financial indicators: 2018 sales expense ratio, management expense ratio, and financial expense ratio are 1.

62%, 18.

78%, -0.

81%, -0 compared with the same period last year.

29pp, -1.

13pp, -0.

50pp (after the 2018 R & D expenses are included in the management expenses).

The sales expense ratio, financial expense ratio and financial expense ratio have steadily decreased, and the overall financial indicators are in good condition.

Net cash flow from operating activities in 2018 was 1.

$ 76 trillion, an increase of 46 per year.

7%, the absolute level and relative growth level are significantly higher than the profit side, and the level of operation is excellent.

2. Increasing production capacity and gradually putting into production, the preclinical research has burst into growth. The company has continued to cultivate drug preclinical research services. At present, the production capacity is almost full, the new capacity is rapidly expanding, and the personnel reserve is expanding simultaneously.successfully launch.

Domestically, according to the number of reports, Beijing Zhaoyan has completed the renovation of the small animal room on the first floor of Building 2, increasing the area of barrier facilities by 750 square meters, and is expected to be available in May 2019; Suzhou Zhaoyan has completed nearly 1.

40,000 square meters of animal room decoration, of which 2700 square meters of animal quarantine building has been put into use in June 2018, the remaining nearly 1.

10,000 square meters of animal property can be expected to be put into use by April 2019. Increasing production capacity will re-release a large number of existing orders, and domestic preclinical research is expected to achieve explosive growth.

In terms of foreign countries, the scale of the report, the company increased its US $ 30 million to US $ 40 million in its wholly-owned subsidiary “Zhaoyan California” to further expand the business scale of “Zhaoyan California”. The 6,000 square meters capacity in San Francisco can be expanded for ZhaoyanProvide support for overseas business.

According to the long-term development strategic considerations, the company further increased the feeding rate of cynomolgus monkeys and established the Zhaoyan (Wuzhou) New Drug Evaluation Center project in Wuzhou, Guangxi. Construction is expected to begin in the second half of 2019.

50,000 non-primate facilities with artificial feeding capacity are prepared to increase production and quality, and at the same time provide a guarantee for the smooth development of subsequent preclinical assessment projects of the company.

In terms of personnel, the company has continuously strengthened the introduction of talents, and the size of the staff has grown steadily. At the end of the reporting period, the number of employees increased to 817 (most of them are direct business personnel). It is expected that in 2019, we will continue to increase human resources to meet demand, and the large-scale talent teamStrongly guarantee the smooth execution of orders in hand.

3. The new business layout is rapidly advancing, cultivating new performance growth points while deepening the pre-clinical drug evaluation business. In order to meet the needs of sustainable development, the company further strengthens its overall competitiveness and continues to accelerate pharmacovigilance. Phase I clinical trials and non-pharmacological safety evaluationWait for the layout of new business to cultivate new profit growth points in the future.

In the area of pharmacovigilance: The company recently invested in the establishment of a subsidiary called “Zhaoyan Mingxun” to provide professional pharmacovigilance technical services for drug R & D, drug manufacturers and market licensors.

At present, the domestic pharmacovigilance market is relatively blank and has a good competitive advantage. The company has been equipped with relevant persons in charge to build a mature team of more than 10 people. It has begun to provide database services, various report writing, training and other services. It has gradually reached about 20 customers, and the response is good.2018 has already begun to contribute revenue.

In terms of clinical trials: The company recently established a wholly-owned subsidiary, “Zhaoyan Pharmaceutical”, to further promote the extension of the industrial chain from preclinical services to clinical services, and enhance the comprehensive capabilities and overall competitiveness of pharmaceutical R & D and expansion services. Some existing contracts have been confirmed.It is expected to gradually contribute revenue performance in 2019.

1) Construction of clinical experimental bases: Complete the construction of bases already contracted in Taicang and Tonghua to ensure full capacity in the second half of the year; at the same time, actively promote this cooperation model with other well-known hospitals and promote the contracting of 2 more hospitals; 2) Team building: Focusing on early clinical areas, completing team expansion and capacity building in the first half of the year, the basic goal is to achieve internal completion of the project, without subcontracting or subcontracting other cooperative units; 3) Construction of clinical biological sample analysis center: complete the construction of the laboratory in Taicang CityIn order to make the analysis ability of clinical samples match and exceed the ability of clinical basic production samples, we will undertake internal and external projects in 2019.

In terms of non-drug safety evaluation: The company has passed the CNAS certification inspection in July 2018 to prepare for non-drug evaluation. In the future, it will expand to pesticides, veterinary drugs, cosmetics and other aspects. The use of veterinary pesticides and pesticides will strengthen internal supervision.The business volume in the non-medical safety assessment field will gradually increase.

Summary: We expect the company’s net profit attributable to its mother to be 1 in 2019-2021.

6 billion, 2.

2.3 billion, 2.

89 trillion, the growth rate was 59.

4%, 32.

9%, 23.

0%, corresponding to PE of 46x, 33x, 25x.The company is an absolute leader in the field of pre-clinical evaluation of domestic drugs, especially safety evaluation. Over-the-counter orders and supplementary orders overlap. Through the release of increased production capacity in 2019, the performance of the next two years will be high and explosive. At the same time, pharmacovigilance and clinical phase I layoutIt is advancing rapidly. In 2019, it will gradually contribute to revenue performance and continuously improve the company’s ceiling.

At present, the domestic CRO industry is extremely prosperous, the company’s subdivision leader is scarce, high performance growth is both explosive and sustainable, the investment value is significant, and maintain the “highly recommended” rating.

Risk warning: less-than-expected capacity expansion; adverse changes in pharmaceutical policies; less-than-expected business expansion; intensified competition in the industry, etc.