Tigermed reported 2023 revenue of RMB7,384mn, up 4.2% YoY, and attributable recurring net income of RMB1,477mn, down 4.1% YoY. Revenue/ attributable recurring net income missed our forecast by 2.9%/ 12.1%, respectively, mainly due to shrinking COVID vaccine revenue, slowdown in global R&D activities, and contracted margins stemming from temporary pricing adjustments coupled by relatively lower lab facility utilization. New orders signed in 2023 amounted to RMB7.85bn, down 18.8% YoY, mainly due to ~RMB1.2bn reduction of COVID pass-through orders. Nonetheless, the total backlog experienced a mild uptick of 2.1% YoY, reaching RMB14.1bn by the end of 2023, which provides a solid foundation for sustainable growth. Management has observed early indicators of a demand resurgence and anticipates that both revenue and attributable recurring net income will achieve mid-teen growth in 2024E, signaling a robust recovery from the previous year.
Early signs of demand recovery. Tigermed experienced heightened volatility in client demand in 2023 due to subdued global biotech funding and escalating competition in the clinical CRO market. However, management has observed a positive shift in macro sentiment since late 2023, with biopharmaceutical funding in China exhibiting a significant sequential rebound. In Jan-Feb 2024, Tigermend’s new orders regained double-digit growth, particularly in the US and Australian markets, according to the management. With this trend to continue, management maintains a positive forecast for full-year demand. Additionally, we want to highlight Tigermed’s promising growth potential in China’s market as the government persists with its supportive policies for domestic pharmaceutical R&D.
Well-progressing globalization strategy. The challenges of the industry did not dampen Tigermed’s commitment to globalization. Underpinned by a growing and dedicated team of 110 PMs and CRAs, Tigermed’s US clinical operation saw rapid growth in revenue and backlog in 2023. Its localized clinical operation team enables Tigermed to better capture opportunities from both Chinese pharmaceutical companies looking to enter the US market, as well as from US clients not fully served by global clinical CROs. Tigermed acquired a Croatia-based clinical CRO, Marti Farm, in Jan 2023, further bolstering its service capabilities in Europe. Tigermed has established clinical teams in South Korea, Southeast Asia and Australia. Owing to its strong performance in the global market, Tigermed signed 15 MRCT projects in 2023. We think a well-established global network will help Tigermed in mitigating potential geopolitical risks.
Maintain BUY. We revised our TP from RMB80.31 to RMB68.57, based on a 10-year DCF model (WACC: 10.95%, terminal growth: 2.0%), to factor in slower projection of revenue and recurring net income growth. We forecast Tigermed’s revenue to grow 13.3%/ 17.7%/ 21.9% YoY and attributable recurring net income to grow 14.2%/ 22.7%/ 27.4% YoY in 2024E/ 25E/ 26E, respectively.
