Incident: On November 23, 2023, it was announced that Zhifei Biotech, Chenan Biotech, Zhirui Investment, and Zhang Gaoxia reached a preliminary agreement on Zhifei Biotech's plan to acquire Zhirui Investment in cash and 100% of Chenan Biotech's shares held by Zhang Gaoxia and signed an “Intentional Share Acquisition Agreement”.

Once the strategy is understood again, the value of the platform is expected to be reshaped by valuation! 1) Chenan Biotech focuses on metabolic diseases such as diabetes and obesity, and has formed a hierarchical pipeline layout for GLP-1 similar drugs and insulin analogues. Currently, there are 6 drug candidates that have entered the clinical stage. Among them, recombinant liraglutide injection and Tokugu insulin injection have completed clinical phase III and are in the marketing application stage; recombinant simeglutide injections are already in phase III clinical phase, and research and development progress is at the forefront of the country. Furthermore, Chenan Biotech's GLP-1/GIP dual-target receptor agonist and oral administration of simegluptide tablets are in the pre-clinical stage. 2) If this transaction is completed, the company's business map will be extended to metabolic diseases such as diabetes and obesity, from a vaccine platform to a biological product platform, and the valuation system is expected to be reshaped. At the same time, the strategy of incubating and cultivating promising biotechnology and innovative products for prevention and treatment through an equity investment platform through an in vitro investment platform has achieved initial results and will continue to promote the company's development. Currently, many companies under Zhirui Investment have a broad layout, which will continue to bring room for imagination.

GSK's strategic cooperation creates a second growth curve. GSK recombinant herpes zoster vaccine: It sells well worldwide. Currently, only two domestic products have a good competitive pattern for marketing and sales. After the company has obtained a Chinese agent for GSK's recombinant herpes zoster vaccine, it is expected to achieve rapid release with the support of its strong sales capacity. 1) GSK's shingles vaccine was approved for marketing by the FDA in October 2017 and marketed in China in June 2020. It quickly became the best-selling superproduct in the world, with global sales of £2.96 billion in 2022. 2) Currently, only two domestic products, GSK and Baike Biotech, have been approved for listing in China. The competitive pattern is good, and there is a rapid expansion window. 3) Under a neutral assumption (640 million people of appropriate age for vaccination, 1% penetration rate, price of 3196 yuan), the domestic sales peak is expected to exceed 10 billion yuan in the future, which is expected to become another major product after the HPV vaccine, creating the company's second growth curve. RSV vaccine: Currently, only two respiratory syncytial virus (RSV) vaccines in the world have been approved by the US FDA. Among them, Arexvy from GSK was approved for marketing by the FDA in May 2023 and officially received clinical approval in China in June 2023. As demand increases due to the aging of the domestic population, the clinical value and scarcity of the RSV vaccine is expected to continue to be reflected, becoming a potentially important variety driving the company's growth.

Existing varieties continue to gain strength, new varieties and new businesses are advancing rapidly, and there is huge room for future growth. The company's fundamentals are of high quality and growth certainty is high. The future market space for HPV vaccines is expected to continue to expand. Varieties such as herpes zoster are expected to create a second growth curve. Since the main line varieties have ushered in a period of implementation, and at the same time, they are also laying out the major fields of biopharmaceuticals, including monoclonal antibodies, cell therapy, and diabetes, etc., with huge potential for future development.

Profit forecast and valuation: We expect the company's net profit from 2023-2025 to be 9.2 billion yuan, 12 billion yuan, and 15 billion yuan, respectively, +22.0%, +30.7%, and +24.8%, respectively. The current stock price corresponding to PE is 17X, 13X, and 10X, respectively, maintaining the buying rating.

Risk warning: HPV vaccine sales fell short of expectations, product development progress fell short of expectations, and industry competition intensified.