Event

The company issues the semi-annual report and dividend plan for 2020.

In the first half of 2020, the company's operating income, return net profit and net profit after deduction were 573 million yuan, 61.49 million yuan and 57.34 million yuan respectively, an increase of 14.57%,-27.60% and-29.32% respectively over the same period last year.

The dividend plan, based on the total share capital of the company in the first half of 2020, will distribute a cash dividend of 0.2 yuan (including tax) to all shareholders for every 10 shares, without giving bonus shares or increasing share capital with provident fund.

Brief comment

The gradual recovery of sales and the 13-price pneumonia volume led to the rapid growth of Q2 in a single quarter. Q2 realized business income, net profit and non-return net profit of 461 million yuan, 79.61 million yuan and 77.25 million yuan respectively, up 42.24%, 72.31% and 81.76% respectively over the same period last year. Q2 terminal vaccination sites gradually returned to normal and 13-price pneumonia vaccine listed sales led to the company's Q2 rapid growth in a single quarter. The profit end of H1 declined due to the impact of Q1 epidemic, equity incentive cost sharing and R & D cost drag.

The issuance of 13-price pneumonia batch is in line with expectations, and the annual volume is expected.

In the first half of the year, the company approved the issuance of varieties: 1) 1.2 million pieces of 13-valent pneumonia, and the progress of the approval was in line with expectations; 2) 640000 pieces of 23-valent pneumonia, down 53% from the same period last year; 3) 1.36 million pieces of Hib, down 25% from the same period last year; 4) 930000 pieces of tetravalent meningitis polysaccharide, down 32% from the same period last year. 5) 950,000 doses of bivalent meningitis polysaccharide vaccine. An increase of 9% over the same period last year. 6) 850000 doses of tetanus vaccine, an increase of 121% over the same period last year.

In the first half of the year, the sales of the company's core varieties were as follows: 1) 13-price pneumonia (pre-filled injection) achieved a business income of 112 million yuan and a gross profit margin of 97.12%. According to the bid price of 598 yuan per unit, the corresponding sales volume was 188, 000. At the beginning of 2020, 13-price pneumonia was approved to be listed on the market, and the overall progress of tender access was affected by the epidemic. Only about half of the provinces completed access. Q3 is expected to speed up tender access, and the volume is expected to be available for the whole year. 2) the 23-price pneumonia vaccine achieved an operating income of 200 million yuan, a decrease of 9.73% compared with the same period last year, and a gross profit margin of 91.92%. According to the average bid price of 200 yuan per unit, the corresponding sales volume is estimated to be 1 million, with the increase in vaccination awareness after the epidemic and the advent of the peak vaccination season. It is expected to continue to maintain good growth throughout the year. 3) the operating income of Hib (pre-filled injection) reached 63.46 million, a decrease of 30.24% compared with the same period last year, and the gross profit margin was 88.93%, which was mainly affected by the Q1 epidemic. We believe that with the 13-price pneumonia bidding access work completed one after another, the sales work is expected to be strengthened in the second half of the year, and the annual volume is expected, which is expected to drive the company's performance to grow rapidly throughout the year.

H1 R & D pipeline continued to advance: 2-price HPV reported for production review, mRNA COVID-19 vaccine carried out a phase 1 clinical study in the first half of 2020, the company's R & D pipeline promoted: 1) in January 2020, 13-valent pneumonia conjugate vaccine officially obtained the "Drug Registration approval", the first batch of products was issued on March 30, and the first injection was vaccinated on April 22. 2) Phase III clinical trial of bivalent HPV vaccine was completed in April 2020 and a "clinical trial report" was obtained. on June 15, a "acceptance notice" for bivalent HPV vaccine production was received, which is currently under review. 3) Phase I clinical trials of nine-valent HPV vaccine are currently under way. 4) the novel coronavirus mRNA vaccine jointly developed by the company and Aibo Biology received the Drug Clinical trial approval approved by the State Drug Administration in June 2020, and phase I clinical trials are currently being carried out.

With the solid R & D strength of Yuxi Watson and Shanghai Zerun, the company has launched six product layouts for the prevention of pneumonia, cervical cancer, meningitis, influenza, hand-foot-mouth disease and other five diseases in the field of heavy second-class vaccines. among them, 13-valent pneumonic polysaccharide conjugate vaccine has been approved and put on the market. At present, the company is rich in pipeline reserves, long-term development is worth looking forward to.

R & D expenses and stock option incentive fees dragged down the current performance, while the remaining financial indicators were basically normal 2020Q2. The company's comprehensive gross profit margin was 82.5%, an increase of 2.2% over the same period last year and 17.3% higher than the previous month. This is mainly due to the gradual recovery of sales from the epidemic and the sales-driven growth of 13-price pneumonia vaccine. In the first half of 2020, the company's sales expenses increased by 14.93% compared with the same period last year, mainly due to the increase in expenses caused by 13-price pneumonia sales. Management expenses increased by 22.92% over the same period last year, mainly due to a substantial increase of 11.56 million yuan in stock option incentive fees. The R & D cost increased by 67.85% over the same period last year, an increase of about 20 million yuan, mainly due to the milestone cost of developing COVID-19 vaccine and herpes zoster vaccine and the increase of phase I clinical cost in cooperation with Aibo Biology. Accounts receivable increased by 31.1% year-on-year, mainly due to the increase in 13-price pneumonia sales, which was basically normal; inventory increased by 53.64% year-on-year, mainly due to the increase in the preparation of finished vaccine products and production materials; the net cash flow from operating activities increased by 38.69% compared with the same period last year, mainly due to the decrease in cash outflow caused by the reduction in the payment of enterprise income tax. Other financial indicators are basically normal.

Profit Forecast and Investment rating

We expect: 1) the company's PCV13 has been listed, and the total sales peak is expected to be 10.5 billion yuan in 2026; 2) the application for registration of HPV-2 has been accepted, it is expected to be approved in 1.5 years, listed in 2022, and the sales peak is expected to reach 4.2 billion yuan in 2030; 3) the peak sales of MCV4, 4-valent influenza virus split vaccine and EV71 are expected to reach 1 billion yuan, 1.4 billion yuan and 1 billion yuan respectively. 4) the stock of products maintains steady growth; 5) the sales peak of Watson Biology is expected to reach about 18 billion yuan in 2029.

Risk hint

Systemic risks in the vaccine industry; COVID-19 vaccine research and development failure; the company's R & D pipeline is not as expected.