Huachuang Pharma: Haoyuan Pharmaceutical: Front-end cash cow business grows steadily, back-end capacity ramp-up may contribute profit elasticity

English summary

Front-end: Horizontal expansion and regional expansion drive sustained growth, multiple barriers build a moat for the cash cow business. The company's front-end business layout has expanded from tool compounds to building blocks and biochemical reagents; in recent years, the latter two have become important growth drivers, and multiple acquisitions have accelerated overseas expansion. Through horizontal expansion and regional expansion, front-end business revenue grew from RMB 545 million to RMB 1.991 billion during 21-25, a CAGR of 38%. The front-end business is the current profit and cash flow center, and the company has built a deep moat for the front-end cash cow business through multiple barriers such as SKU category expansion, service system, and brand effect. Back-end: Order growth and gross margin improvement may contribute profit elasticity, scarce one-stop ADC CDMO is ready to go. 1. The company's earlier large capital expenditure put pressure on back-end gross margin and overall profit. As back-end revenue and project numbers grow, capacity utilization is expected to gradually ramp up, and back-end gross margin is expected to gradually improve, reducing the negative impact on overall profit and gradually turning into profit contribution, with upward earnings elasticity.