2021-10-29 Dongxing Securities Co., Ltd. Cheng Shiyue, Meng Lin conducted research on pre-science biology and issued a research report "Q3 performance is not as expected, R & D advantage continues to strengthen". This report gives a buy rating to pre-science biology, and the current stock price is 25.50 yuan.

Prefamily biology (688526)
Event: the company announced that in the first three quarters of 2021, the company achieved a total operating income of 776 million yuan, an increase of 28.37% over the same period last year, a net profit of 386 million yuan, an increase of 20.69% over the same period last year, and a net cash inflow of 474 million yuan from operating activities, an increase of 32.01% over the same period last year.
Comments:
Q3 performance is not as expected, but the product competitiveness is still prominent. Affected by the rapid decline in pig prices, downstream farmers suffered serious losses, market demand for seedlings declined, resulting in the company's Q3 performance less than expected. The company's Q3 realized revenue of 231 million yuan, down 7.42% from the same period last year, and realized a net profit of 100 million yuan, down 27.10% from the same period last year. In terms of gross profit margin, the company's gross profit margin in the first three quarters was 79.15%, down 4.21% from the same period last year, 73.14% from the same period last year, 11.76pct from the same period last year, and 5.70pct from Q2. In terms of expense rate, the company's sales + management expense rate in the first three quarters was 20.60%, an increase of 2.72pct over the same period last year, mainly due to the lower expenses affected by the epidemic in 2020 and returning to the normal level this year. In the context of poor downstream demand, the company's key products still maintain strong competitiveness, and the number of Q3 batches of blockbuster porcine pseudorabies vaccine increased by 11.71% compared with the same period last year. At present, the company has more orders on hand, and the contract debt reaches 201 million yuan, an increase of 214.51% over the beginning of the year, providing a reliable guarantee for future revenue and performance growth. The company's full-year revenue growth target of 30% is expected to be achieved.
The advantage of R & D continues to strengthen, and the reserve of products under research is sufficient. The company continued to strengthen its R & D advantages, with R & D investment totaling 56.7978 million yuan in the first three quarters, with yoy+39.16%, accounting for 7.32% of revenue, an increase of 0.57pct over the same period last year. At present, the company has obtained a total of 37 new veterinary drug registration certificates, including 3 for Q3, 2 for cooperation with Huazhong Agricultural University and 1 for cooperation with third parties. The company continues to consolidate its cooperative R & D relationship with Huazhong Agricultural University. at present, 25 of the more than 40 products are being developed in cooperation with Huazhong Agricultural University. many products are in the stage of registration and examination of new veterinary drugs, and the reserves of products under research are sufficient. We believe that the company continues to increase its R & D, and the deep R & D partnership with Huanong is also expected to be maintained for a long time, with outstanding R & D advantages and strong product competitiveness. With the continuous fullness of the product matrix of the company's non-strong vaccine-free products for pigs, the product competitiveness and combination advantages are expected to continue to strengthen. The company ploughs the market vaccine for many years and has the leading marketing advantage in the industry. it is expected that under the background of large-scale breeding and market vaccine reform, relying on the strong advantage of R & D + product + marketing trinity to further enhance the company's market share in the field of pig vaccine, and continue to consolidate the leading position of non-strong vaccine-free vaccine for pigs. At the same time, the company actively distributes poultry vaccines, ruminant vaccines and pet vaccines, which is expected to become a new growth point in the future.
Company profit forecast and investment rating: due to the poor demand for downstream farming, we adjust the company's profit forecast. It is estimated that the return net profit of the company in 21-23 years is 5.37,7.04 and 804 million yuan respectively, the EPS is 1.16,1.51 and 1.73 yuan, and the PE value is 22.68,17.31,15.16 times. Maintain a highly recommended rating.
Risk hint: the market seedling reform is not as expected, the company's product research and development is not as expected, and so on.

A total of 13 agencies have rated the stock in the last 90 days, including 11 buy ratings and 2 overweight ratings; the average institutional target price in the past 90 days is 43.34; according to the Securities Star valuation analysis tool, the pre-science biological (688526) good company has a rating of 4 stars, a good price rating of 2 stars and a comprehensive valuation rating of 3 stars.