Pig prices in the doldrums, superimposed costs increased, short-term profits under pressure. In 2022, the company achieved revenue of 329 million yuan, compared with the same period last year (including 328 million yuan of veterinary biological products, accounting for 99.78%), and realized a net profit of 61 million yuan, or-44.56% of the same period last year. The decline in performance is affected by many factors, such as low downstream pig prices, increased expenses related to marketing and research and development, increased credit impairment losses, reduced investment profits and losses, and so on. The company's 2023Q1 operating income is from-8.08% to 82 million yuan compared with the same period last year, and the net profit is from-33.69% to 16 million yuan compared with the same period last year, mainly due to the late bidding time, the promotion of the "hit first and then make up" policy, and the impact of increased R & D expenses.

The domestic leader of foot-and-mouth disease synthetic peptide vaccine, pig biological products are pure and standard. The company is a pig vaccine as the main production and sales enterprises, accounting for more than 99% of the income, the main products are a series of foot-and-mouth disease vaccine, porcine circovirus type 2 subunit vaccine (recombinant baculovirus OKM strain) and veterinary diagnostic products.

The company has a significant advantage in foot-and-mouth disease vaccine. In 2004, the swine foot-and-mouth disease type O synthetic peptide vaccine developed by the company obtained the national first-class new veterinary drug registration certificate, which is the first foot-and-mouth disease synthetic peptide vaccine at home and abroad. At the same time, the company's foot-and-mouth disease synthetic peptide vaccine continues to upgrade, the product from one-component to two-component, three-component, from unit price to two-price, continue to lead the domestic market. In 2018, the company ranked first in the domestic market share of 62.79% of the synthetic peptide vaccine for foot-and-mouth disease. In addition, in 2017, the company successfully developed the first bivalent inactivated vaccine of swine foot-and-mouth disease type O and type An at home and abroad, obtained the national first-class new veterinary drug registration certificate, and further enriched the company's product structure and increased sales unit price. enhance the company's market competitiveness and profitability.

With equal emphasis on independent R & D and cooperative R & D, diversified layout is expected to open the performance increment. The company persists in R & D and innovation, and in terms of new products, the cooperative development of mRNA vaccine in 2022 is progressing smoothly and laboratory research has made a breakthrough; porcine circovirus type 2 subunit vaccine has obtained the product approval number and has been put on the market. The newly developed transmissible gastroenteritis vaccine, porcine epidemic diarrhea vaccine, porcine delta coronavirus disease inactivated vaccine, swine fever virus inactivated vaccine and classical swine fever genetic engineering subunit vaccine (CHO-133D) are all in the stage of registration of new veterinary drugs. In terms of the new production line, in May 2022, the company announced that the IPO project "suspension Culture foot-and-mouth Disease inactivated Vaccine Project" would raise 99.03 million yuan to invest in the construction of "Animal inactivated Vaccine Project". In the future, the workshop can be used to produce swine fever genetic engineering subunit vaccine, porcine transmissible gastroenteritis, epidemic diarrhea, swine delta coronavirus disease triple inactivated vaccine, porcine circovirus type 2 subunit vaccine, and African swine fever subunit vaccine, virus-like particle vaccine and other inactivated vaccines. Through this initiative, the company actively distributes new areas such as genetically engineered vaccines, and is expected to further expand the range of products.

Risk hint: there is an uncontrollable epidemic in the process of breeding, and the progress of vaccine batch issuance is not as expected.

Investment advice: cover for the first time and give a "buy" rating. The company is the leading pig foot-and-mouth disease vaccine enterprise in China, which is optimistic about the performance repair driven by the warming of pig prices in the medium term and the growth potential brought by the diversified product R & D layout for a long time. We estimate that the net homing of the company from 2023 to 2025 will be 0.73, 1.24, 0.38 million, 0.18, 0.30 and 0.34, respectively, and the corresponding share price, PE, will be 42.5, 24.9, 22.5X.