What happened: the company released its three-quarter report for 2022. In the first three quarters of 2022, the company achieved a total operating income of 3.706 billion yuan, an increase of 74.06% over the same period last year, a net profit of 531 million yuan, an increase of 45.84% over the same period last year, and a deduction of 677 million yuan for non-net profit, an increase of 76.10% over the same period last year.

Comments:

The company's performance in the third quarter maintained rapid growth, in line with expectations. In the third quarter of 2022, the company achieved a total operating income of 1.358 billion yuan, an increase of 74.24% over the same period last year, a net profit of 110 million yuan, an increase of 144.35% over the same period last year, and a deduction of 196 million yuan for non-net profit, an increase of 35.75% over the same period last year.

The company's two blockbuster vaccines 13-price pneumonia vaccine and bivalent HPV vaccine continued to release, driving the company's third-quarter performance to maintain rapid growth, performance in line with expectations. The company's Q3 single-quarter sales gross profit margin and net profit margin were 89.58% and 13.75% respectively, and the company's R & D expense rate and sales expense rate increased in the third quarter, resulting in a 11.97 percentage point reduction in the company's sales net profit rate.

The batch distribution of 13-valent pneumonia vaccine and bivalent HPV vaccine increased rapidly, while the batch distribution of other products was affected by equipment transformation. In order to overcome the crowding impact of COVID-19 's epidemic on routine vaccination, the company timely adjusted its sales focus, accelerated access to key domestic areas, made multi-dimensional efforts to build product brand and market influence from the construction of sales system, consumer education, terminal services and channel layout, and focused on promoting the sales of 13-valent pneumonia conjugate vaccine and bivalent HPV vaccine. In the first three quarters of 2022, subsidiary Yuxi Watson issued 6068172 doses of 13-valent pneumonia vaccine, an increase of 50.45% over the same period last year. Bivalent HPV vaccines were issued with the first batch of biological products in May, and a total of 2088511 doses of bivalent HPV vaccines were issued by the end of the third quarter.

Affected by equipment transformation, 326720 doses of Hib vaccine were issued in the first three quarters of 2022, a decrease of 80.92% over the same period last year. 3103339 doses of AC polysaccharide vaccine batches were issued, a decrease of 80.66% over the same period last year.

A number of products under research have made clinical progress, and the research and development work has been steadily advanced. March 2022, the company's bivalent HPV vaccine "Drug Registration Certificate". The novel coronavirus mRNA vaccine jointly developed by the company and its partners has been approved by the Indonesian State Food and Drug Administration (EUA), and the company is actively promoting the overseas listing of the product. The company's nine-valent HPV vaccine has also entered the Ⅲ phase of clinical research in September, and various work is being carried out to enroll the subjects. The novel coronavirus mutant mRNA vaccine jointly developed by the company and other units has also obtained the "Drug Clinical trial approval" and has begun to enter clinical research. The company's other products under research are also advancing one after another, and the research and development work is advancing steadily.

Maintain cautious recommendation ratings. The batch distribution of 13-valent pneumonia vaccine and bivalent HPV vaccine is growing rapidly, a number of products under research have made clinical progress, and the reserves of products under research are rich. The company's earnings per share in 2022 and 2023 are expected to be 0.67 yuan and 1.01 yuan respectively, with corresponding valuations of 58 times and 38 times respectively, maintaining a "cautious recommendation" rating.

Risk hints: the approval progress or sales of new varieties is lower than the expected risk, the research and development of products under development is less than expected risk, market competition aggravates the risk, and so on.