On the double whammy of good fundamentals and high valuations, can a combination of medicine and medicine break new ground?

The last time it was updated was Colon Botai, an ADC. It's been gone for 4 months, but I'm still there. Today I'm writing about a water seller on the ADC circuit, Pharmacology Joint Alliance for one-stop outsourcing services such as R&D and manufacturing. If you look at the name, you'll know it's a spin-off of Pharmaceutical Biology, right? Can this company launch a new one?

As I said before, in the case of Daxin,The best stock selection criteria are high-growth scarce leaders in high-growth industries.So does Pharmacovigilance meet this standard?

From the perspective of industry growth,The ADC track is one of the most popular tracks in the global biomedical field. Sullivan expects a compound growth rate of about 30% in the next few years, and the market size will reach more than 60 billion US dollars in 2030. Since ADC development and manufacturing processes are more complex than the general biomedical field, the division of labor is also more detailed, and the proportion of outsourcing is also higher, and the penetration rate of outsourced services exceeds 60%. Therefore, the future growth rate of the ADC outsourcing service market will also reach a level close to 30%.Appropriate high-growth racetrack.

Judging from its position in the industry, Pharmacovigilance Alliance is also one of the leaders.Judging from the global competition pattern, Pharmacovigilance Union's global market share in 2022 was close to 10%, which is about half of Lonza's number one. However, the Pharmaceutical Alliance is currently mainly engaged in relatively small projects that have not been commercialized. It is ranked first in terms of the number of projects. As the commercialization of ongoing projects progresses, there is great hope that it will take the top spot. Well, looking at the domestic market, pharmaceuticals account for 70% of the market share and occupy an absolute leading position.

Judging from the company's own growth rate, Pharmacovigilance has also sparked lightning along the way.Its revenue surged from 100 million yuan in 20 years to 1 billion dollars in '22, increased more than 9 times in two years, and adjusted net profit increased from more than 30 million to nearly 200 million, about 5 times in two years. By the first half of this year, revenue had increased more than 2 times, and net profit had doubled. This growth rate definitely far exceeds the average growth rate of the industry.

Although it is unlikely that the company's revenue will double in the future as its revenue volume reaches a certain scale, there is probably still potential for annual growth of about 30%-50% over the next few years.

We see that the net profit growth rate here is lower than the revenue growth rate. The reason behind this is that gross margin continues to decline. However, bargaining power declined not because the competitive landscape worsened, but because the business was expanding too rapidly and production capacity was insufficient, some raw material production was outsourced to the parent company, Pharmaceutical Biotech. Father and son have settled their accounts clearly, and Pharmacology has to make a difference in price as a middleman, so the cost of Pharmacology has gone up. Pharmaceutics Joint Federation used most of its newly built production capacity in the third quarter of this year, and gross margin will soon improve. This is not a big problem.

Also, from the perspective of scarcity,The one that specializes in ADC outsourcing is probably the only share in the entire Hong Kong and US stock market. If institutional capital is to be invested, this is the only company that has no semicolons.

Overall, the Pharmacovigilance Federation generally met the standards I mentioned. Unfortunately, although the fundamentals of the Pharmaceutical Union are OK, it is a bit cold, and the valuation is not very cheap. The market value of the prospected stock market is about 3 billion US dollars, and the price-earnings ratio is about 73 times based on rolling profit. This valuation, combined with the historical growth rate of medicine and medicine, is not at all significant in a bull market.However, this is a bear market; indeed, it is a bit of persuasion to retreat.

Fortunately, it is true that there are 3 points of support, and I won't completely retreat.

First, top cornerstone investors, with strong fundamentals.I've written specifically about the role of the cornerstone before. If you are interested, you can revisit it:Can Hong Kong stocks lay a new foundation for investors and use them as a new reference for investors?I'm not going to repeat it here.

The cornerstones of the Pharmaceutical Alliance include trillion-dollar private placements, medical-focused funds, and industrial capital at the level of Novo Nordisk. This is a cornerstone lineup that can rank in the first tier in a bull market. Moreover, the Cornerstone subscription ratio still accounts for 65%.

Second point, judging from the chip structure,The cornerstone has taken up 65%, and with such strong foreign-funded cornerstones bringing goods, other national estimates are similar. As a result, the selling pressure is not expected to be significant. However, although the current subscription multiplier for Pharmacist Alliance is not very high, if it becomes popular, we should also be wary of the possibility of a callback. Once the return of chips is sent back, the chips will be scattered, and the selling pressure will be much greater.

Third, Hong Kong and pharmaceutical stocks have been rising continuously for 3 months, and the atmosphere has been created.It can hedge against the impact of the overall bear market on Hong Kong stocks on valuation to a certain extent.

Taken together, although the valuation of the Pharmaceutical Alliance is not cheap, its excellent fundamentals, the best cornerstone lineup over the past two years, a pretty good chip structure, and the current upward trend in pharmaceutical stocks still give a certain margin of safety. There may not be much room for valuation, but it probably won't drop much if it falls.

However, judging from the margin multiplier currently displayed on the Futunniu App, the possibility of triggering a pullback is extremely high. If the public sale ratio is returned to 30%, it means that the volume of goods from retail investors will exceed 1 billion dollars, and institutional capital will generally not end up in the dark market. Therefore, during the dark market trading period, there may be a risk of decline due to high selling pressure, so we also need to pay attention to position control.

OK, this is the end of the joint analysis of Pharmacovigilance. If you have different opinions, you are welcome to discuss it. If you think it's pretty good, you are welcome to pay attention.