Hillhouse, source peak blessing! Navitas' strongest challenger, why does 20 million profit support a valuation of 4 billion+?

Recently, Suzhou Saifen Technology submitted a prospectus on the Shanghai Stock Exchange, preparing to be listed on the Science and Technology Innovation Board, and plans to raise 800 million yuan.

Saifen Technology is a liquid chromatography material enterprise focusing on the development and production of liquid chromatography materials for drug analysis, detection and separation and purification, and its core products are columns and chromatography media. Saifen Technology has more than 5,000 customers in the field of analytical chromatography worldwide, including Roche, Pfizer, Eli Lilly, Gan&Lee Pharmaceutical, Chia Tai Tianqing, Qilu Pharmaceutical, Regeneron, Moderna and other companies.

On November 22, 2021, Saifen Technology completed the last round of financing before the IPO, with a valuation of 4.055 billion. The company's shareholder lineup is strong, including CPE Yuanfeng, Hillhouse, Sinopharm, Sherpa Investment, Gan & Lee Pharmaceutical, etc.

01

The dislocation competition of Division: a leader in analytical chromatography

According to the application direction, chromatography technology can be divided into analytical chromatography and preparative chromatography: when laboratory analysis and testing is called preparative chromatography, the main purpose is to accurately monitor and analyze the content and impurities of the target mixture, with a wide range of applications, a large number of customers, but a small purchase volume of a single customer; The chromatographic packing materials used in industrial separation and purification are typical preparative chromatography, the main purpose of use is to separate the target from impurities and harmful substances, pay attention to concentration and yield, the number of customers is much smaller than analytical chromatography, but the demand increases with the scale of drug production. (The relationship between analytical chromatography and industrial chromatography is similar to that of scientific and industrial use)

The main products of Saifen Technology are chromatographic columns and chromatographic packing materials, and in the company's overall revenue structure, analytical chromatography business dominates, accounting for 88.23%, 79.68% and 60.67% of revenue from 2019 to 2021, respectively.

According to the prospectus of Saifen Technology, the company's technical level in the field of analytical chromatography has reached the domestic leading and some international advanced levels.

At present, the main players in the domestic column market are still overseas manufacturers such as ThermoFisher, Agilent, Tosoh and Waters, and only a few leading domestic manufacturers have a certain market share.

According to the Prospective Industry Research Institute, China's column production reached 172,000 in 2021, accounting for 4.2% of the global column production. In 2021, the output of analytical chromatography columns was about 17,200, accounting for about 10% of the domestic production.

In addition, the gap between the analytical chromatography products of Saifen Technology and overseas giants is narrowing, and the performance of some subdivided products has been comparable to or even better than similar imported products.

In an article published in the journal mAbs in 2021 reporting on the efficient purification of an antibody, Eli Lilly reported that it used two size exclusion column products for comparative analysis, including Superdex200 of Situofan and SRT-10CSEC-300 of Saifen, and the analysis results showed that Scifen's SRT-10CSEC-300 had higher resolution and refined antibody samples had higher yields and comparable purity. Flow rates up to 7.5 mL/min and faster separation speeds save development time.

However, the compound annual growth rate of the analytical chromatography business of Saifen Technology is about 20.45% per year from 2019 to 2021, although it is much higher than the domestic industry growth rate of 13.44%. In contrast, Navitas, a listed company in the same industry, has an average revenue compound growth of 85% from 2019 to 2021, reflecting higher growth.

This is determined by the business structure of the two, according to the data disclosed in Navitas' 2021 annual report, the columns and chromatography media produced accounted for 7.09% and 78.13% of the operating revenue, respectively. From the perspective of the overall business structure of Saifen Technology, the business growth of chromatography media (industrial chromatography) in recent years has reached a compound annual revenue growth rate of 44.73%.

Compared with analytical chromatography, the industrial color field has a larger market space and higher growth potential (the data of the Prospective Industry Research Institute in the introduction prospectus below).

In 2021, the global column market size reached 2.26 billion US dollars, and it is expected to reach 3.03 billion US dollars in 2025, with a compound growth rate of 7.61%; The market size of Chinese columns will reach 1.25 billion yuan in 2021 and is expected to reach 2.07 billion yuan in 2025, with a compound growth rate of 13.44%.

In 2021, the global chromatographic media market size was 5.8 billion US dollars, and it is expected to reach 9 billion US dollars in 2026, with an average annual compound growth rate of 9.19% during the period; In 2021, the size of China's chromatographic media market was 7.5 billion yuan, and it is expected to reach 20.3 billion yuan in 2026, with an average annual compound growth rate of 22.04%.

02

Cross-time: Navitas and Saifen each enter each other's territories, and Navitas expands the use of fillers

The extension strategies of Saifen Technology and Navitas Technology have certain differences, but in order to expand the ceiling of the track where they are located, both choose to enter each other's areas of strength.

Navitas established Nanospectral Analysis in 2018, specializing in the research and development, production and sales of chromatographic columns, currently has a production capacity of 100,000 units, the company is conducting the research and development of high-performance analytical chromatographic chemistries and columns; In 2021, Navitas' column business revenue reached $32 million.

In 2017, Saifen Technology built a large-scale production base focusing on chromatographic chromatography media production in Yangzhou covering an area of more than 40,000 square meters, and the first phase of the project has been put into operation, including eight production lines for antibodies, vaccines, insulin, recombinant proteins and other pharmaceutical media, with an annual production capacity of nearly 25,000 liters.

From 2019 to 2021, the industrial purification business of Saifen Technology achieved rapid growth, from 7.2739 million revenue in 2019 to 58.3809 million in 2021, and the proportion of related income also increased from 9.93% to 37.79%.

If the existing business structure and expansion layout of the two are reviewed, Saifen Technology, which has expanded from analytical chromatography to chromatographic media, may have higher growth flexibility, but based on the high replacement cost of replacing chromatographic packing material suppliers by biopharmaceutical companies and the squeeze brought by the accumulated advantages of domestic manufacturers such as Navitas, Saifen Technology needs to compete out of place or show convincing performance in the market.

In addition to entering the field of analytical chromatography, Navitas has also entered protein purification systems by investing in Spectrum instruments, and has formed a series of product systems including packing materials, chromatography columns, chromatography systems and protein purification chromatography systems to benchmark Topfan. In addition, Navitas has also actively expanded the application field of the company's microsphere products, and in 2021, the company achieved revenue of 37.68 million yuan in the field of flat panel display and 15.8 million yuan in the field of in vitro diagnosis.

The layout of Navitas Technology may provide a development path for the "elder brother" Saifen Technology.

03

Frail filler second old? Explore the possibility of a company's performance explosion

The current profitability of Saifen Technology can be regarded as "weak", and the company's net profit in 2019-2021 is -10.6481 million, 9.3857 million and 21.6202 million respectively. Even in the first half of 2022, the company's net profit was only 9.7711 million, how can it afford a valuation of 4 billion or more?

In fact, we can explore some "clues" of the strong future performance of Saifen Technology from the research of the prospectus.

The IPO application of Saifen Technology is according to the first standard of the science and technology innovation board, and the mandatory conditions of this standard are that the market value is not less than 1 billion, and the net profit in the past two years is positive and the cumulative net profit is not less than 50 million yuan. According to the net profit of 20 million in 2021, the company is expected to record a net profit of more than 20 million in the second half of this year, a year-on-year increase of 50%.

At the same time, this can also be verified from the quarterly revenue of Saifen Technology, and the company's average revenue in the first and second quarters of 2022 showed rapid growth.

The release of production capacity in Yangzhou Saifen in 2021 has brought a greater catalyst to the performance of the parent company.

At the product level of chromatography media, affinity chromatography packing and ion exchange packing (the sales quantity of ion exchange packing increased from 1202.38L to 3374L in that year, and the sales quantity of affinity chromatography packing increased from 25.58L to 271.5L), and silica gel matrix filler (sales volume increased from 1373.62kg to 12699.28kg). ) has achieved a rapid increase in sales. (Note in the figure below: The capacity change of silica gel matrix filler in 2022, the company has adjusted the sales products, and the future sales of small particle size products with higher added value)

In terms of analytical chromatography, the company's production capacity has steadily increased, which is sufficient to meet market demand; The production capacity of chromatography media suddenly increased by 10 times in 2021, and whether sales can keep up with production needs to track the company's relevant orders. As of the signing date of the prospectus of Saifen Technology, the company's cumulative new orders in 2022 exceeded 250 million yuan, which is 1.67 times the revenue in 2021, which proves to a certain extent that the industry is very prosperous.

From the perspective of profitability indicators, industrial purification products are affected by scale effects, and the gross profit margin has steadily increased in recent years, driving the overall company's gross profit margin.

However, Saifen Technology still needs to continue to expand its production capacity in this IPO fundraising plan, and add 200,000 liters of chromatographic media production capacity after the completion of the new production capacity, mainly including ion exchange packing materials, affinity chromatography packing materials, composite chromatography packing materials, etc.; Reasonable expansion of production is a good thing, but whether it can be digested after 2 years has become a core issue.

Conclusion: It is foreseeable that as the "second oldest in the industry", Saifen Technology can maintain excellent growth in the next 2-3 years. However, from the overall situation of the industry, the listing of multiple companies in the industry may often bring about the loss of scarcity in a certain segment, resulting in a decline in the overall valuation center of the industry, which needs to be vigilant.