1H23 realized deduction of non-net profit of 60 million yuan.

The company announced that the realized income, return net profit and non-net profit of 1H23 are 1.5,11,600 million yuan respectively, which is-85%,-64% and-78% respectively compared with the same period last year. The sharp decline in revenue is mainly due to the high income base caused by the 22-year influenza vaccine batch issued in advance. Based on the high influenza epidemic expectation for the whole year (low pre-stored immunity and high prevalence of 1Q23), it is expected to catalyze the demand for influenza vaccination. We estimate that the company's return net profit in 2023-25 will be 1.19 billion yuan. We give the company a 23-year PE valuation of 27x (comparable company Wind unanimously expects the average PE valuation to be 25x, taking into account the upward repair of the influenza vaccine industry and the company's capacity advantage, giving a premium), with a target price of 40.70 yuan (taking into account equity changes, the previous value is 40.70 yuan), maintaining a "buy" rating.

Influenza vaccine: batch issuance rhythm disturbance, annual demand or recovery

The income of the company's 1H23 influenza vaccine was 150 million yuan, and 3 batches were issued (1H22 1.06 billion yuan, 64 batches were issued in advance, leading to a high base number). The optimization of epidemic prevention policy and the increase in personnel mobility are expected to raise the influenza epidemic forecast in 2023. We expect that influenza vaccine sales in 23 years are expected to exceed 20 million (14.54 million in 2022): 1) the double low prevalence + vaccination rate in the past two years has caused the population's pre-stored immunity deficiency, superimposed population activities make influenza epidemic basis, and we expect influenza prevalence to increase in 2023. 2) the epidemic of 1Q23 H1N1 has greatly driven the demand for vaccination, and we expect high epidemic expectations plus attention to disease control, which is expected to promote vaccination. 3) by August 23, 72 batches of IIV were issued by the company, and we estimated that about 18 million (IIV4 adults ~ 14.5 million, IIV4 children ~ 3 million, IIV3 ~ 500000).

New products are expected to contribute to the increment and continue to advance in the research and development of pipelines.

1) Vero cell rabies vaccine and tetanus vaccine 2M23 have been approved, the former has less DNA residue and higher safety, has both 4-injection method and 5-injection method, and the latter is refined before detoxification, and the immunogenicity is better. The two vaccines focus on local bidding access for 23 years, and are expected to grow into large varieties through product quality, pricing system and blood products sales resources in the future. 2) We expect MenAC to report production in 2023 and DTaP to carry out phase III clinical practice. 3) the company establishes mRNA R & D platform and actively explores the research and development of mRNA influenza vaccine, which is currently in the early stage of research and development.

The fluctuation of financial indicators is mainly due to the disturbance of sales rhythm, and equity incentives are expected to stimulate operational vitality. The rates of 1H23 Company have changed greatly compared with the same period last year, mainly due to the disturbance of sales rhythm. The company's equity incentive has been granted for the first time (3.4 million shares, accounting for 0.85% of the company's total share capital, with another 600000 shares reserved), to 28 directors, executives and core backbones, with a grant price of 24.42 yuan. The performance appraisal target is to take 2021 as the benchmark, and the growth rate of non-net profit deducted in 2023-25 is not less than 40%, 80%, 100%, that is, the deduction of non-net profit in 23-25, 8.2 pesque 1.07 billion yuan. We believe that the company's equity incentive scheme is reasonable and covers the main core backbone, which is expected to contribute to the long-term development of the company.

Risk tips: influenza prevalence and product sales are not as expected, R & D progress is not as expected, COVID-19 epidemic development and the risk of prevention and control policy changes.