Event: when the company released its semi-annual report for 2023, the operating income was 630 million yuan, down 3.8% from the same period last year; the net profit of shareholders belonging to the parent company was 250 million yuan, down 21.4% from the same period last year; and the net profit after deducting non-return was 230 million yuan, down 22.4% from the same period last year.

Human diploid crazy seedling Q2 shipments have declined, and the increased investment in R & D affects the performance of the profit end. From a quarterly point of view, the company's 2023Q1/Q2 single-quarter operating income is respectively 280,000,000 yuan (+ 4.3% Universe 9.3%), and the net profit of returning home is 1.1 / 140 million yuan (- 22% Universe 20.7%). The company's crazy seedling Q2 year-on-year revenue decline is mainly due to the company actively promoting the volume of pure end products, the shipper has declined, and the larger decline in profits is mainly due to increased investment in R & D expenses. In terms of profitability, the company's gross profit margin in 2022 was 93.5% (- 0.4pp) and net interest rate was 39.1% (- 8.7pp), mainly due to the increase in R & D and sales expenses. The sales expense rate is 27.6% (+ 4.35pp), the management expense rate is 6.4% (+ 0.4pp), and the R & D expense rate is 16.7% (+ 6.3pp). This is mainly due to the company's increased investment in pipeline research.

The production capacity of human diploid crazy seedlings is gradually released. From a product point of view, the income of H1 diploid crazy seedlings in 2023 was 630 million yuan (- 2%), accounting for 99%. According to the batch issuance data, the H1 company issued 2.63 million diploid seedlings in 2023, a decrease of 32.4% over the same period last year, mainly due to the company's digestion channel inventory, with a significant increase in net sales. At present, the design capacity of the company has reached 5 million units, and the actual production capacity is estimated to be about 7 million units. With the production capacity of the investment project put into production around 2023-2024, the overall capacity will increase to 1100 million units per year, which is conducive to the continuous production of the company's products.

Pet vaccines bring new growth points to the company. At present, the pet vaccine products of the cooperation between the company and Hangzhou Youben have been submitted for approval and issued. At present, many pet hospitals across the country have signed up to book the company's veterinary vaccine products. At present, the number of pets in China is about 100 million, which is expected to increase at a rate of 7%. At present, the domestic market is still dominated by vaccines from overseas manufacturers, and the company is expected to rapidly expand its market share by virtue of product quality advantages and cost-effective advantages.

Profit forecast and investment advice. It is estimated that the net profit from 2023 to 2025 will be 760 million yuan, 1.08 billion yuan and 1.23 billion yuan respectively, maintaining the "buy" rating.

Risk tips: the pace of new production capacity of human diploid rabies vaccine may not be as fast as expected; the company's inventory is not sufficient to meet the risk of seasonal fluctuations in sales; the risk of a single product structure.