Transform, accelerate!
As of 2023, the global pharmaceutical industry market size will reach about 1.5 trillion US dollars, which will bring market space to the upstream API industry.
Among them, chemical APIs occupy an important market position in the API industry due to their wide application and large output, and the market size of the global chemical API industry will reach $230 billion in 2023.
At the same time, due to its cost advantage and production capacity, mainland China has become one of the most important suppliers of the global API industry chain, and from the perspective of production capacity, the market share of mainland China will reach 28% in 2022, ranking first in the world.
It has to be said that in the selection of companies in large industries, the API industry meets this standard.
However, in recent years, API companies have experienced a lot of shocks due to changes in the relationship between supply and demand, and the average growth rate of net profit of leading Xinhecheng and Puluo Pharmaceutical in 2022-2023 is not optimistic, and if it were not for the recovery of the price of vitamins and other chemicals, the first half of this year would not have recovered too well.
From 2020 to 2023, the company's revenue increased from 2.915 billion yuan to 3.931 billion yuan, but then there was even a loss in 2023.
As of the first half of 2024, the company's performance is still declining, but compared with last year, the large loss caused by inventory impairment is finally expected to improve.
Therefore, for Jianyou shares, the company currently has a reversal logic, which is brought by the API business.
After analyzing its fundamentals, we can also see the transformation logic from the pharmaceutical preparation business, which is also what the company has been doing and doing well in recent years.
As of 2023, the company's pharmaceutical business accounts for 70.5%, and the API business accounts for 25%, which is a change from the previous situation where the proportion of APIs is dominant.
It is also from 2020 to 2023 that the compound growth rate of Jianyou's pharmaceutical business revenue has reached 38.11%, which significantly exceeds the company's overall growth rate and has reached a very fast growth level.
Next, let's take a look at these two logics of Jianyou from the two major businesses.
1. API business
In the first half of 2024, although the price of heparin API is still declining, it will remain low and fluctuate as a whole, and the export volume of the API sector will rebound significantly, and the output of the industry will show a recovery trend driven by demand, so the industry is expected to bottom out.
Subsequently, although the gross profit margin of Jianyou's API business has also declined, the worst time for product sales may have passed, especially after destocking in 2023, the company's inventory turnover rate has rebounded significantly.
As of the first half of 2024, Jianyou's heparin API revenue is 533 million yuan, the second largest domestic market share, second only to Hepalink, and the API revenue has recovered to 53.46% of last year's full year.
2. Pharmaceutical business
As we mentioned earlier, Jianyou's drug revenue has shown a continuous growth trend, and it can be said that the company's integrated transformation from API production to drug manufacturing has been successful.
In the pharmaceutical business, with the help of the advantages of APIs, the company's heparin preparations took the lead in gaining a first-mover advantage, especially in the domestic drug experience of collective procurement at the same time, heparin preparations through exports to obtain incremental markets, and with the help of channels and competitive advantages, quickly seize the market.
"Enoxaparin" is the core product, and in 2019, with the halo of "domestic first", the market share soon reached 20%, and it continued to maintain a strong market position, second only to Sanofi, a multinational pharmaceutical leader.
By 2023, it is estimated that the company's overseas heparin preparation revenue has exceeded 1 billion yuan, and heparin products, as one of the most effective anticoagulant and antithrombotic drugs, already have a huge market demand.
In addition, the non-heparin drugs of Jianyou are also on the rise.
According to statistics, Jianyou is currently the Chinese local enterprise with the largest number of overseas injections approved, with nearly 70 varieties listed in more than 60 countries and regions, far exceeding Qilu, Hengrui and other pharmaceutical leaders.
Among them, there are a considerable number of non-heparin products.
After heparin products, non-heparin products are expected to become the company's new relay business.
The products are mainly concentrated in the fields of cardiovascular diseases, anti-tumor, anesthesia, anti-bacterial infection, etc., and basically cover high-quality products with large market demand and stable demand, so the value of the product cluster is high, and it is expected to continue to increase in volume in the future, even exceeding the heparin products.
Therefore, even if the current performance of Jianyou shares is not good, it still shows a good competitive advantage:
First, the profit advantage
For an enterprise, the most important thing is nothing more than two points, profit and growth, of which profit is related to the core competitiveness of the enterprise.
The profitability of Jianyou shares is still very strong, and the gross profit margin of the main business in 2023 is also 48.4%, which is higher than that of most API companies, and higher than traditional manufacturing companies such as Gree and Fuyao Glass.
Of course, more importantly, the company's net profit margin is also very high, reaching 29% at the highest time in recent years, and as of the first half of this year, the net profit margin level can recover before the gross profit margin is also a good phenomenon, and the recovery of gross profit margin is supported by the pharmaceutical business, or there is no need to worry about it.
In addition, because Jianyou shares also maintain a very high "net present ratio", it is certain that the net profit is not book profit, indicating that the income is completely converted into cash flow, which is in a favorable situation for downstream collection and upstream payment.
As of the first half of 2024, the net present ratio of Jianyou shares has reached 149.73%, which is still the highest level in history.
Second, growth advantages
Secondly, growth is a crucial factor in the valuation and intrinsic value of a company.
The growth advantages of Jianyou are fully reflected in two aspects, one is based on the company's own product expansion.
In addition to the heparin preparations and approved non-heparin preparations we mentioned earlier, the company is now even expanding into the field of biological drugs, and has rapidly deployed potential products such as insulin, nab-paclitaxel, and adalimumab through independent research and development, cooperation, and acquisition.
In terms of speed, this advantage of Jianyou is even better than that of some traditional pharmaceutical companies, thus gaining a first-mover advantage, especially overseas.
Second, it is based on the perspective of the future growth of the pharmaceutical industry.
Jianyou shares are the multiple growth drivers of APIs and drugs, overseas and domestic, chemical drugs and biological drugs, in fact, any market segment, there is a lot of room for growth.
Taking the emerging biologics market as an example, in the process of rapid development of innovative drugs, in order to cope with the heavy medical burden, biosimilars have sprung up (similar to chemical generics, but they must be in clinical trials).
IQVIA expects global biosimilar sales to grow rapidly from $11.4 billion in 2023 to $38.5 billion in 2027, with a compound growth rate of 36%, ushering in a phase of rapid growth with the expiration of many original drug patents.
In short, Jianyou shares currently show a certain reversal logic, which makes it show a significantly different performance from performance growth, and after analysis, we can also see the transformation logic hidden in the company's development, which is actually a more important level for Jianyou.
Finally, as of October 18, 2024, the company's market capitalization is still 53.3% below its peak.
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Source: Flying Whale Investment Research