On the first day of listing, I almost took a roller coaster, can Chengda Pharmaceutical expect to be optimistic in the future?

Today's disk, the CXO sector as a whole continued to decline, Medici, Yaoshi Technology, Boteng shares fell nearly 7%, Kai laiying, Kanglong Chemical Has also weakened.

However, Chengda Pharmaceutical, a concept stock that landed on the ChiNext board for the first time today, performed strongly, soaring to 188 yuan during the session, which once triggered a temporary suspension of trading, with the highest increase reaching 158.63%.

As of the close, the stock price fell back to 128.55 yuan, and the turnover rate reached 78.77% throughout the day.

According to the data, Chengda Pharmaceutical is mainly committed to providing key pharmaceutical intermediate CDMO services for multinational pharmaceutical enterprises and pharmaceutical research and development institutions, and is engaged in the research and development, production and sales of L-carnitine series products.

As of the first three quarters, the company achieved operating income of 289 million yuan, an increase of 8.58% year-on-year, and achieved a net profit attributable to the mother of 0.7 billion yuan, an increase of 6.65% year-on-year.

Due to the higher income from the disposal of assets due to the disposal of the old factory area on Hengshan Road in 2020, the annual performance of 2021 has declined.

It is expected to achieve a net profit attributable to the mother of 103-105 million yuan in 2021, down 13.14% -15.04% year-on-year, and it is expected that the net profit attributable to the mother after deducting non-deduction will be 1-102 million yuan, an increase of 18.30% -21.02% year-on-year.

The company's main sources of revenue are CDMO services and L-carnitine products, accounting for about 43% and 50% respectively.

The company is one of the earliest enterprises in China to realize the industrialization of L-carnitine series products, with a global market share of 9.45%, 10.67% and 14.25% in 2018-2020, respectively.

Its main product levocarnitine has passed the ONDA, domestic drug registration, GMP compliance and other on-site inspections, has established a good international reputation, is one of the main suppliers of L-Carnitine series products in the world.

However, the competitive landscape of the L-carnitine industry has basically stabilized, and the market size will not have a large growth, and the agency predicts that the compound annual growth rate of 2019-2027 will be less than 5%.

According to F&S statistics, the global CDMO market size increased from $17.8 billion in 2014 to $26.8 billion in 2018, and it is expected that by 2023, the global CDMO market size will increase to $51.8 billion, with an average annual compound growth rate of 14.10%.

CDMO enterprises in Europe and the United States have a long history, production technology, equipment advancement and management capabilities are at the world's leading level, while domestic CDMO enterprises due to the short development time, the current domestic CDMO industry accounts for a relatively low global market share.

Domestic CDMO listed companies include WuXi AppTec, Gloria Ying, Boteng Shares, Jiuzhou Pharmaceutical, Nuotai Biologics, etc.

Taking WuXi AppTec as an example, compared with the global small molecule CDMO industry market size of Frost & Sullivan, WuXi AppTec's market share in 2020 is less than 3%.

However, domestic pharmaceutical companies have the advantage of low cost, and overseas CDMO orders continue to accelerate the transfer to China.

From the perspective of delivery form, the CDMO service results of Chengda Pharmaceutical are mainly delivered to customers in the form of pharmaceutical intermediates, APIs and other products, which are basically consistent with the same industry and conform to industry practices.

However, due to the lack of financial strength, single financing channels and other factors, there is a big gap between the current CDMO business scale of Chengda Pharmaceutical and the listed CDMO enterprises in China, and currently occupies less than 1% of the domestic market share.

At present, the average price-to-earnings ratio of the entire CXO sector is 70.2 times, which is nearly half lower than the average PE of 2021 year-to-date.

Among them, the DEL platform drug sieve leader Chengdu pilot PE is 112 times, the preclinical leader Medici PE is 102 times, and the CDMO leader Gloria Ying PE is 101 times.

The issue price of Chengda Pharmaceutical was 72.69 yuan, the price-to-earnings ratio was 83.1 times, and as of today's closing price was 128.55 yuan, which was 98.99 times for the price-earnings ratio.

From a fundamental point of view, although the company has a certain market position in the L-carnitine business, the future growth rate of this industry has slowed down significantly, and the CDMO business, the proportion of domestic market share has always been relatively small, whether it can seize more market share in the future, it remains to be examined.

In view of the current valuation level corresponding to the company's business performance is already comparable to that of the industry, the risk of valuation adjustment needs to be paid attention to in the future.

This article originated from Grand Gateway