Investment highlight

Hualan vaccine covered for the first time (301207) was rated to outperform the industry, with a target price of 35.00 yuan. Based on the Puse E valuation method, we give the company 20.1 times 2024 price-to-earnings ratio. The reasons are as follows:

Domestic influenza vaccine leader, the first-mover advantage is outstanding. At the beginning of its establishment, the company was driven by independent research and development, and established a complete vaccine operation and management system with influenza vaccine as the core variety. The company first launched tetravalent split influenza virus vaccine in 2018 and already has adult and child types to meet the vaccination needs of different age groups. The company sold 1454 doses of influenza vaccine in 2022, and we expect the company to have a market share of more than 35%. Considering that the company has the first-mover advantage of all kinds of influenza vaccines, the industry-leading large-scale production capacity, and the mature sales network covering the whole country, we expect the company to continue to maintain its leading position in the domestic influenza vaccine industry. According to the company's 3Q performance forecast, the company's net profit of 1-3Q was 5.1-550 million yuan, an increase of 143% Murray 167% over the same period last year, suggesting that the company's performance is expected to pick up significantly this year.

COVID-19 's influence is basically clear, and the coverage rate of influenza vaccine in China is expected to increase. After the launch of tetravalent influenza vaccine, the company led the upgrading of the domestic influenza vaccine market, gradually replacing the traditional trivalent influenza vaccine, and driving the rapid rise of domestic influenza vaccine vaccination rate. However, under the repeated influence of the domestic COVID-19 epidemic in 2020-23, all kinds of influenza vaccine terminal vaccination continued to be frustrated, of which the domestic influenza vaccination rate in the influenza season 2021-2022 was only 2.47% (corresponding to the market size of about 5 billion yuan), which was significantly lower than that in Europe and the United States. Starting from 2023, COVID-19 in China has influenced the clearance, superimposed on the improvement of residents' health awareness, and we expect that the domestic influenza vaccine industry is expected to restore growth.

Differential layout of vaccine pipeline, the company's product line is expected to gradually enrich. In February 2023, the company freeze-dried human rabies vaccine (Vero cells) and adsorptive tetanus vaccine have been approved, in addition, the company AC meningococcal conjugate vaccine has completed phase III clinical, the company is expected to report production in 2023; three components of tetanus vaccine has completed phase I clinical, the company is expected to start phase III clinical trial in 2023, the company also has a number of influenza vaccines under research.

What is the biggest difference between us and the market? We are optimistic that the domestic influenza vaccine industry will pick up from 2023 and that the company will continue to dominate the market expansion.

Potential catalyst: flu vaccine sales exceeded expectations.

Profit forecast and valuation

We expect the company's EPS to be 1.45,1.74 yuan and CAGR to be 46.3% in 2023-2024.

For the first time, we cover Hualan Vaccine and give it an "outperform industry" rating. The current stock price corresponds to 19.4 times / 16.2 times 2023 / 2024 P / E ratio. Based on the Pash E valuation method, we give the company 20.1 times 2024 P / E ratio, corresponding to a list price of 35.00 yuan, which has 24.4% upside space over the current stock price.

Risk

The recovery of the industry is not as expected; the safety of vaccine products; the intensification of homogenization competition; the risk of single product dependence; the issuance of vaccine batches is not as expected.