The company's revenue in 2022 was 5.086 billion yuan, +46.89% year on year; realized net profit of 729 million yuan, +70.35% year on year; net profit of non-return mother was 859 million yuan, +45.33% year on year. Considering that the company is currently the only listed company that currently has two major vaccine varieties, the 13-valent pneumonia vaccine and the bivalent HPV vaccine, and is actively laying out the mRNA technology platform, we gave the company a valuation level of 40x PE in 2023 and lowered the target price to 44 yuan (the original target price was 55 yuan) to maintain the “buy” rating.

The performance was growing rapidly in line with expectations. The company's revenue in 2022 was 5.086 billion yuan, +46.89% year on year; realized net profit of 729 million yuan, +70.35% year on year; net profit of non-return mother was 859 million yuan, +45.33% year on year. The company's gross margin and net interest rate in 2022 were 88.02% and 18.45% respectively. The year-on-year ratio was -0.59pct and +1.08pcts respectively, which remained relatively stable. The sales expenses ratio, management expenses rate, and R&D expenses ratio were 39.76%, 5.3%, and 18.34% respectively. R&D expenses increased by 50%, mainly due to increased investment in R&D of new products such as nine-valent HPV and COVID-19 vaccines.

Domestic substitution of the 13-valent pneumonia vaccine has been accelerated, and production of traditional varieties has resumed one after another. The company issued 7.721,000 doses of the 2022 13-valent pneumonia conjugate vaccine in batches, an increase of 55.96% over the same period last year. In the same period, China issued a total of 108 batches of the 13-valent pneumonia vaccine, and the company issued 70 times. Domestic substitution of the 13-valent pneumonia vaccine was accelerated. Furthermore, in the first half of the year, the company confirmed sales revenue of 1 million doses of the 13-valent pneumonia vaccine to Morocco, and carried out technology transfer work for the localized production of this vaccine in Morocco. Some of the company's product production lines underwent equipment modifications in the early stages due to the rectification of the WHO-PQ project. Production and batch issuance of the Hib vaccine and AC polysaccharide vaccine resumed in the second half of the year, achieving batch issuance of 617,500 doses and 6.0492 million doses respectively. After the subsequent rectification is completed, production and batch issuance of other products are expected to resume one after another.

The bivalent HPV vaccine was issued for the first time, contributing to new performance growth points. The company's bivalent HPV vaccine was approved and issued 884,700 doses for the first time in May, and a total of 4.9805 million doses were distributed in batches in 2022. The design and production capacity of the company's bivalent HPV vaccine is 30 million doses, which strongly guarantees production and supply. The company received admission in 30 provinces and cities across the country this year, with the exception of Tibet, Hong Kong, Macao and Taiwan. At the same time, the WHO-PQ application was accepted by WHO. The company's bivalent HPV vaccine protects 100% of people aged 9-14 and over, and can be given to women aged 9-30.

We expect the cumulative penetration rate of China's HPV vaccine to be close to 10% by 2022, and the potential market space is huge.

Nine-valent HPV has entered clinical phase III and is actively deploying mRNA technology platforms. On September 7, 2022, the company initiated phase III clinical research on the nine-valent HPV vaccine. On September 30, 2022, the company's novel coronavirus mRNA vaccine obtained emergency use authorization (EUA) from Indonesia. It is the first COVID-19 mRNA vaccine independently developed by China and approved for overseas marketing. It is used for basic immunization or enhanced immunity for people aged 18 and above. According to its 2022 annual report, the company MCV4 is in clinical phase III. The company actively lays out mRNA technology platforms:

The COVID-19 mutated mRNA vaccine in collaboration with Blue Magpie Biotech is undergoing clinical research; the shingles mRNA vaccine collaborated with Abbott Biotech, the RSV mRNA vaccine and influenza mRNA vaccine collaborated with Blue Magpie Biotech, and the generic influenza siRNA drug collaborated with Shengnuo.

Risk factors: The company's main vaccine product sales (13-valent pneumonia vaccine, bivalent HPV vaccine) and research and development (mRNA vaccine, nine-valent HPV vaccine) fell short of expectations.

Investment advice: With the gradual increase in vaccination awareness, consumption upgrades, and the increase in health demand, there is strong certainty that the company's future performance will grow. We adjusted the company's net profit forecast for 2023/24 to 1,751 million/1,922 billion yuan (the original forecast was 1,725 billion/1,807 billion yuan), the additional 2025 forecast was 2,379 million yuan, the corresponding EPS forecast was 1.09/1.20/1.48 yuan, and the current price corresponding to PE was 32/29/23 times respectively. Referring to comparable companies' 2023 PE forecast (based on CITIC Securities Research Department's forecast), due to lower COVID-19 vaccination expectations and the impact of vaccine impairment, there was a correction in the valuation levels of relevant vaccine companies. As of April 4, 2023, 100g Biotech's PE in 2023 was 36x (the relatively high valuation was due to a good competitive pattern for the shingles vaccine, and the market space was huge), Kangtai Biotech's 2023 PE was 22x, the average value was 29 times. Considering that the company is currently the only listed company with two major types of vaccines, the 13-valent pneumonia vaccine and the bivalent HPV vaccine, and is also actively laying out the mRNA technology platform to give a certain valuation premium, we gave the company a 40x PE valuation level in 2023, lowered the target price to 44 yuan (the original target price was 55 yuan), and maintained the “buy” rating.