The 2021 results are in line with our expectations
The company announced its 2021 results: revenue of 4.30 billion yuan, with KWISA (COVID-19 vaccine) receiving conditional listing approval and emergency use authorization in many countries; net profit of 1,914 million yuan, corresponding to a profit of 7.74 yuan per share, in line with our expectations; the company announced that it plans to distribute a cash dividend of 0.8 yuan per share (tax included).
Development trends
The COVID-19 vaccine was rapidly distributed, and profit was achieved for the first time in 2021. Benefiting from Kevisa's listing in many countries around the world, the company's vaccine business revenue in 2021 was 4.30 billion yuan, of which revenue in mainland China was 1.24 billion yuan and overseas revenue was 3.06 billion yuan. Up to now, Kevisa has been approved to step up vaccination in mainland China, Argentina, Malaysia and Indonesia. The March 2022 WHO announcement indicates that the company's COVID-19 vaccine is undergoing an emergency use list (EUL) and pre-qualification (PQ) review. It is currently in the clinical trial case review stage. We believe domestic and international sequencing is expected to provide incremental orders for the company in 2022. In addition to the COVID-19 vaccine, the company's ACYW135 group meningococcal polysaccharide conjugate vaccine was approved domestically at the end of 2021. This product is the first quadrivalent meningococcal conjugate vaccine in China. Considering the pace of vaccine batch issuance and procurement, we expect this product to start contributing revenue in the second half of 2022.
Actively build sales and R&D teams to transform platform-based innovative vaccine enterprises. The company's sales expenses in 2021 were 106 million yuan, an increase of 538.9% over the previous year. Up to now, the company's commercialization team consists of about 400 people and has formed a sales network covering 30 provinces, cities and autonomous regions in China, and is actively preparing for subsequent sales of vaccine products other than COVID-19. The company continues to invest in R&D and expand its pipeline portfolio. The R&D expenses in 2021 were 879 million yuan, an increase of 105.1% over the previous year. As of December 31, 2021, the company's R&D team reached 309 people, an increase of 41% over the previous year; in addition, the company has also begun vaccine research and development based on the mRNA platform.
Innovative vaccines continue to be increased, and research and development pipelines are progressing smoothly. Phase III clinical trials of the 13-valent pneumococcal conjugate vaccine began in April 2021, and basal immunization will be completed within 2021. The company expects it to complete phase III clinical trials in 2022; phase I clinical trials of dTCP and dTCP enhanced vaccines for infants and young children have been completed, and the company expects the two vaccines to start phase III clinical trials in 2022. Furthermore, the company's inhaled adenovirus vector COVID-19 vaccine has completed phase II clinical trials. Research has proven that the company's inhaled COVID-19 vaccine can activate the triple immunity of body fluids, cells, and mucous membranes. Immunogenicity and safety performance are excellent. Currently, the company is carrying out follow-up clinical trials.
Profit forecasting and valuation
Due to the rapid changes in the global COVID-19 vaccine pattern, we conservatively estimated the company's future COVID-19 vaccine sales in the forecast model and lowered the 2022/2023 EPS by 97.1%/95.2% to 0.47 yuan/0.98 yuan.
A-shares continued to outperform industry ratings, taking into account the adjustment of profit forecasts and the smooth progress of the company's research pipeline. We lowered our target price by 10.5% to 336.01 yuan based on the DCF model, which has room for an upward trend of 37.7% from the current stock price. H shares continued to outperform industry ratings. Based on the DCF model, we lowered our target price by 5.8% to HK$180.51, which has 35.4% upside from the current stock price.
risks
There is a risk that the price of the COVID-19 vaccine will drop. Commercialization has fallen short of expectations, and research and development progress has fallen short of expectations.