Incident: On February 22, Zhifei Biotech announced that it intends to repurchase the company's shares.

It is proposed to repurchase 3-5 billion yuan of company shares to reduce registered capital. The company plans to use its own capital of 300 to 500 million yuan to repurchase the company's shares through centralized bidding transactions to cancel and reduce the company's registered capital. The repurchase price was no more than RMB 75 per share, and the closing price for the day was RMB 52.59 per share, and the corresponding premium rate was 43%. Based on the maximum price of shares to be repurchased, it is estimated that 0.17% to 0.28% of the total share capital can be repurchased. According to the upper limit of share repurchase amounts, repurchase capital accounts for about 1.01% of total assets in the latest reporting period, about 1.67% of owners' equity attributable to shareholders of listed companies, about 1.19% of current assets, and 17.24% of monetary capital, which is relatively low. Stock repurchases are an important step for the company to further implement “double improvement in quality and return”. It highlights the company's confidence in future development prospects and recognition of its own value, and helps enhance investor confidence.

From a vaccine platform to a large biological product platform, the value of the platform is expected to be reshaped in valuation. The company has adopted an innovative strategy of “independent research and development as the main focus, cooperative R&D as a supplement, and investment incubation as a supplement”, and has now formed three major R&D and production bases and nine R&D technology platforms to consolidate its self-research capabilities. Previously, the company planned to acquire Chen'an Biotech, and the business layout will be extended to cover metabolic diseases such as diabetes and obesity, taking the first step from a vaccine platform to a biological products platform, and the valuation system is expected to be reshaped. Furthermore, Zhirui Investment has successfully incubated a number of innovative technology companies. The treatment field has a broad layout and will continue to bring room for imagination.

GSK's strategic cooperation creates a second growth curve. Currently, only two recombinant shingles vaccines are on the market in China. The competitive pattern is relatively good, and there is a rapid release window. The protection efficiency of the GSK shingles vaccine is as high as 97%. Global sales of the GSK shingles vaccine reached £2,958 billion in 2022, making it a major vaccine product after the HPV vaccine. At present, the domestic market penetration rate is low. The company has signed an exclusive distribution and joint promotion agreement with GSK, with a total purchase amount of 20.64 billion yuan, which will bring the company a leading drug supply advantage. Under a neutral assumption (640 million people of eligible age, 1% penetration rate, 3,196 yuan per serving), the peak domestic sales volume is expected to exceed 10 billion yuan in the future, which is expected to become another major single product after the HPV vaccine, contributing to high performance growth.

Profit forecast and valuation: We expect the company's net profit to be 9.2 billion yuan, 12 billion yuan, and 15 billion yuan respectively in 2023-2025, +22.0%, +30.7%, and +24.8%, respectively. The PE corresponding to the current stock price is 14X, 11X, and 8X, respectively, maintaining a “buy” rating.

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