Incident: The company released the first quarter report of 2023. 2023Q1 achieved operating income of 278 million yuan, an increase of 4.26% over the previous year; achieved net profit of 105 million yuan, a decrease of 22.24% over the previous year; and achieved net profit of 94 million yuan after deducting non-net profit of 94 million yuan, a decrease of 23.95% over the previous year.

Revenue is growing steadily, and I'm optimistic about further volume growth in '23. Revenue grew steadily in 23Q1. Since epidemic control was liberalized in December '22, shipments have slowed due to widespread infections of the epidemic, etc., and the company actively digested inventory, and net sales achieved rapid growth.

Advances such as the hexavalent norovalent vaccine led to higher R&D costs in the first quarter, and profit growth was slower than revenue growth. As inventory digestion gradually becomes normal and recovery improves, we expect further release of wild seedlings throughout the year. Batch issuance: 0 batches were issued in batch 23Q1 (of which 17 batches were issued in batch 22Q1).

Investment in R&D continues to increase, increasing terminal sales and promotion. The 2023Q1 company's sales expenses were 78 million yuan (+14.13%), and the sales rate was 28.19% (+2.44pp). After the Spring Festival, the company actively promoted sales and strengthened the assessment of terminal tasks. The management fee was $22 million (+15.89%), and the management fee rate was 7.98% (+0.80pp). R&D expenses are 49 million yuan (+131.59%), the R&D fee rate is 17.50% (+9.62pp), the R&D cost rate is increasing year by year, and product innovation and new process innovation are carried out continuously. Finance rate -0.62% (+1.37pp). The 2023Q1 company has an inventory of 185 million yuan, accounting for 4.94% of assets (+0.30pp). The absolute amount basically matches revenue.

The pet vaccine brought new growth points, and the hexavalent norovalent vaccine advanced clinical trials. The pet vaccine products that the company collaborated with Hangzhou Youben have now been submitted and distributed in batches. A number of pet hospitals across the country have already signed up to order the company's veterinary vaccine products. The company is expected to quickly expand its market share through product quality advantages and cost performance advantages. The recombinant hexavalent norovirus vaccine was approved for phase I clinical trials in Australia in February 2023. At the same time, the company is actively developing rotavirus vaccine, influenza vaccine, shingles vaccine, etc., and the research pipeline is gradually being enriched.

Profit forecast and investment recommendations: Combining the delivery and net sales situation in the first quarter, we expect the company's operating revenue for 2023-2025 to be 1,773 million yuan, 21.46 million yuan, 2,578 million yuan (value before adjustment was 2,273.6 million yuan), up 22.54%, 21.06%, 20.12%; Guimu's net profit was 726 million yuan, 870 million yuan, 1,042 million yuan (before adjustment was 831, 11.38 million, 1,494 million yuan), a year-on-year increase of 21.34%, 19.92%, 19.72% . The company is a leader in the domestic diploid market segment. Benefiting from the release of production capacity, it is expected to maintain rapid growth over the next 5 years and maintain its “buy” rating.

Risk warning: the risk of the listing and sale of competing human diploid cell rabies vaccine and the competitive risk of the Vero cell rabies vaccine, the competitive risk of a relatively single product structure, the risk that the human diploid vaccine market space falls short of expectations, the risk of adverse vaccine reactions, case risks, policy and regulatory risks.