【Company Research】Tigermed (300347 CH) – Strengthening global presence
- Solid growth in 2020 amid COVID-19 pandemic. Tigermed reported 2020 revenue of RMB3,192mn (+13.9% YoY), largely in line with our estimate. Tigermed’s attributable net profit and attributable recurring net profit increased 107.9% / 26.9% YoY to RMB1,750mn/RMB708mn in 2020, which slightly beat our estimates. And attributable net profit beat consensus estimate by 9.6%. Tigermed booked RMB1,138mn investment fair value gain in 2020 vs RMB185mn in 2019. Meanwhile, total backlogs grew significantly by 44.9% YoY to RMB7,260mn as of end-2020, indicating strong revenue growth in 2021E and beyond. As of the end of 2020, the Company had RMB10.1bn cash on hand, providing sufficient capital for its future expansion. The Company recorded RMB999mn operating cashflows in 2020, up 89% YoY, driven by healthy business growth and shortened receivable days.
- Expect strong recovery from a low base in 2020. Tigermed’s clinical CRO services income was negatively impacted by the COVID pandemic due to lower capacity in hospitals and delays in clinical process. By segment, clinical trial solutions revenue increased 12.8% YoY to RMB1.52bn, while clinical-related & laboratory services revenue grew 14.6% YoY to RMB1.66bn. By region, overseas income growth slowed down to 6.8% YoY mainly due to the COVID impact, while domestic income realized a solid 19.2% YoY growth thanks to strong demand from domestic innovative drugs. Tigermed acquired Yaxincheng (medical translation) in Jul 2019 and Mosim (early clinical development services) in Jan 2020, which further strengthened the Company’s leading position in clinical CRO industry. Thanks to the decrease in pass-through fees, gross margin of clinical trial solutions business improved significantly by 6.3ppts in 2020. As of end-2020, Tigermed had 389 ongoing drug clinical research projects, up from 287 as of end-2019, while 95 were overseas single-region projects, and 20 were MRCTs. With rich project pipelines, growing backlogs and the ease of global COVID pandemic, we expect Tigermed to see strong recovery from 2021.
- Global expansion to drive long-term growth. Tigermed provides clinical CRO services for Chinese innovative drugs to go global and multinational enterprises’ drugs to enter Chinese market. Meanwhile, we expect Tigermed to further expand its overseas business network to become a clinical CRO company with global operations. As of end-2020, Tigermed had 772 overseas-based employees. The Company has expanded its clinical CRO capabilities in US, Europe, Australia, South Asia, Latin America and Africa. Tigermed recorded over RMB300mn new bookings of MRCTs in 2020. It already has established networks in Asia Pacific regions, while US market could be the next emphasis.
- Maintain BUY. We trimmed our 2020E/21E net profit forecasts by 3.1%/6.2%, respectively, to reflect the impact from COVID-19 pandemic. We rolled over our TP to 2021E and derived our DCF-based TP of RMB190.25 (WACC: 9.84%, Terminal growth: 4.0%).
