Items:

The company released its mid-2023 report: revenue in the first half of the year reached 685 million yuan, an increase of 6.68% over the same period last year, and the net profit returned to the mother was 134 million yuan, an increase of 28.09% over the same period last year. The net profit after deducting non-return was 123 million yuan, an increase of 14.11% over the same period last year.

Of this total, the revenue in the second quarter alone was 321 million yuan, an increase of 6.84 percent over the same period last year, and the net profit returned to the mother was 28 million yuan, an increase of 15.64 percent over the same period last year. The net profit after deducting non-return was 23 million yuan, an increase of 23.38 percent over the same period last year.

Comments:

The performance of non-export products is outstanding and the income is growing steadily. In the first half of the year, the company achieved revenue of 685 million, an increase of 6.68% over the same period last year. Under the condition that the breeding industry was affected by the pig cycle, the company carried out organizational changes to the marketing system, explored regional sales models, and ploughed large-scale breeding customers and key channel customers. In the first half of the year, subsidiary Jinyu Baoling (mainly foot-and-mouth disease vaccine, ruminant vaccine, etc.) earned 440 million, and yoy-1.4%, net profit was 83.35 million yuan. Yoy+3.3%, net interest rate 18.9% Yangzhou Youbang (mainly non-mouth pig seedlings, etc.) has an income of 135 million, a net profit of 48.99 million yuan for yoy+45.1%, and a net interest rate of 36.2% yoymilk 8.5pct for yoy+89.4%,. The sales income of non-foot-and-mouth disease vaccine products continues to grow rapidly, and the product income structure is more balanced. Liaoning Yikang (bird flu 3 price vaccine, etc.) income of 91.83 million yuan, yoy+6.9%, net profit of 26800 yuan, year-on-year turnround, poultry seedling sales team completed personnel optimization, performance improved significantly.

Multiple measures led to a significant increase in gross profit margin. In the first half of this year, with the increase in the proportion of the company's high gross margin non-export products, the reform of the marketing system to achieve channel sinking, and the continuous promotion of core products to reduce costs, improve quality and increase efficiency through process optimization, the company's gross profit margin improved significantly. In the first half of this year, it was 57.61% yoymilk 6.01pct. Looking forward to the second half of the year, as the volume of high-end brucellosis products such as M5-90 vaccine and non-export products continue to be introduced into head breeding customers, the company's gross profit margin still has room for improvement. On the expense side, the sales / management / R & D expenses for the first half of the year are RMB 1.33 million, respectively, and the corresponding sales / management / R & D expense rates for yoy+21.57%/34.48%/20.68%, are 19.37% 9.14% and 9.43%, respectively, and the corresponding sales / management / R & D expenses rates are 1.89 and 1.09 pct, respectively. The net profit is 19.32% and the corresponding net profit is 134 million and yoy+28.09%.

The research pipeline is rich, and the prospect of non-plague vaccine is promising. In 18-22 years, the company invested a total of 1 billion yuan in research and development, with a comprehensive layout of pipelines such as pig, ruminant, poultry and pet vaccines. The follow-up potential varieties such as bovine nodule vaccine, swine foot-and-mouth disease VLP vaccine, classical swine fever E2 subunit vaccine, brucellosis REV.1 vaccine, cat triple vaccine and canine quadruple vaccine are expected to greatly enrich the company's product matrix. As for the most important non-plague vaccine, the non-plague subunit vaccine jointly developed by the company and the Chinese Academy of Sciences has formally submitted the non-plague subunit vaccine emergency evaluation materials to the Ministry of Agriculture, and the safety and effectiveness meet the requirements of the Ministry of Agriculture for emergency evaluation. According to the 2023-2030 strategic plan issued on the 30th anniversary of the company, the company will continue to increase R & D, with an annual investment of not less than 300 million yuan in R & D, technological transformation and AI, and the ability of R & D and innovation is expected to be further improved.

Be optimistic about the new growth opportunities brought about by the diversified development of the company's products, and upgrade the rating to a strong push. The pipeline layout of the company's non-export products is becoming more and more perfect, and the stack is continuously introduced into downstream breeding customers, which is expected to constantly optimize the business structure and enhance the anti-risk ability. Taking into account the upstream aquaculture scene, the promotion rhythm of the company's new products on the market, and the intensity of R & D investment, we adjust the forecast 23-24 net profit of 2.85 and 366 million (the previous value is 410 million and 550 million), and introduce the forecast of 450 million yuan in 2025. reference to comparable company valuation and company history valuation Combined with the company's expectation of heavyweight products and the scarcity of high-quality R & D resources (P3 laboratory), it is given 35 times PE in 24 years, adjusted the target price to 11.55 yuan, and adjusted to "strong push" rating.

Risk tips: slow recovery of demand, intensified market competition, and less-than-expected progress in new product research and development.