PHARMARON(300759) Minsheng Securities·2024-03-06 16:00Investment Rating and Core Views - The report gives a "Recommend" rating for the company, with a target price of 24.27 RMB [4] - The core view is that the company is a leading integrated, international CXO platform with strong growth potential in both mature and emerging businesses [2][3] - The company's revenue is expected to grow from 11.515 billion RMB in 2023 to 14.585 billion RMB in 2025, with a CAGR of 12.2% to 15.0% [4] Business Model and Industry Outlook - The CXO industry is highly prosperous, with global pharmaceutical R&D spending expected to grow at a CAGR of 6.8% from 2022 to 2027, reaching 3.357 trillion USD [13] - The outsourcing penetration rate in the CXO market is expected to increase from 47.1% in 2022 to nearly 55% by 2025, driven by cost efficiency and faster R&D processes [14] - The company's integrated platform model, combining laboratory services, CMC, clinical research, and CGT services, creates strong synergies and a funnel effect, ensuring long-term growth [2][3][26] Key Business Segments - Laboratory Services: The core business, contributing around 60% of revenue, with biological sciences accounting for over 51% of laboratory service revenue in H1 2023 [2][9] - CMC Services: Highly synergistic with laboratory services, with 80% of CMC revenue coming from existing laboratory clients in 2022 [2] - Clinical Research Services: The company is building an integrated global clinical platform, with clinical services expected to grow rapidly as profitability improves [2][3] - CGT and Large Molecule Services: The company is actively expanding in the CGT and large molecule CDMO sectors, with significant potential for future market share growth [2][17] Financial Performance and Projections - The company's revenue in 2022 was 10.266 billion RMB, a 37.9% YoY increase, with net profit attributable to shareholders of 1.375 billion RMB [4] - Revenue is projected to grow to 14.585 billion RMB by 2025, with net profit expected to reach 1.975 billion RMB, representing a 19.4% YoY growth [4] - The PE ratio is expected to decline from 27x in 2023 to 22x in 2025, reflecting improving profitability [4] Strategic Expansion and Global Presence - The company has expanded its global footprint with 21 operational entities across China, the US, and the UK, enhancing its ability to serve international clients [33] - Recent acquisitions, such as the UK Cramlington and US Coventry facilities, have strengthened the company's global CMC production network [53] - The company is focusing on emerging areas like CGT, ADC, and oligonucleotides, with future capital expenditures expected to prioritize these high-growth segments [35] Competitive Advantages - The company benefits from China's engineer dividend, with labor costs significantly lower than global peers, providing a cost advantage in the CXO industry [22] - The integrated platform model ensures strong client stickiness, with over 90% of revenue in H1 2023 coming from repeat clients [36] - The company's advanced technology platforms, such as gene editing and 3D cell models, enhance its R&D capabilities and service offerings [41][42]