2023 revenue, net non-net profit YoY +32%, 68%

The company announced that in 2023, revenue, net profit attributable to mother, and net non-net profit deducted were 24.1 billion yuan, 8.6 billion yuan, and 760 million yuan, respectively, +32%, +67.8% year-on-year. Among them, 4Q23 revenue, net profit to mother, and net profit deducted from non-net profit were +160%, +1442%, and +8755%, mainly due to the recovery of influenza vaccination requirements. Based on the recovery in demand for influenza vaccination, we expect the company's net profit to be 10.7/13.4/1.68 billion yuan (+25/25/ 25% yoy) in 2024-26. We gave the company a 24-year PE valuation of 16x (comparable company Wind agreed to expect an average PE valuation value of 16x), a target price of 28.60 yuan, and maintained a “buy” rating.

Influenza vaccine: Demand has recovered significantly, and the vaccination rate is expected to rise moderately in 2023, the company's influenza vaccine revenue is 2.40 billion yuan, with a year-on-year increase of 32%, with sales exceeding 19 million units. We expect sales of influenza vaccines to exceed 23 million units in 24:1) Influenza vaccination is strictly seasonal, and the influenza vaccination season in the past three years has all been affected by various external factors (we believe COVID-19 vaccination in 2021, optimization of prevention and control policies in '22, increase in influenza prevalence in '23), along with eliminating disruptions to future influenza vaccinations It is expected to return to normal; 2) The company's influenza vaccine production capacity and market share are leading in the industry; 3) China's overall influenza vaccination rate from 2022 to 2023 is ~ 3%, compared with the US (~ 50%), there is still a lot of room for improvement.

New products are expected to contribute incrementally and continue to advance in the research pipeline

1) The Vero cell vaccine and tetanus vaccine 2M23 were approved, and 8 and 1 batches were issued in batches respectively in 23. The former has fewer DNA residues and is safer, and has both 4- and 5-dose methods. The latter is refined first and then detoxified and has better immunogenicity. The two vaccines will focus on promoting local recruitment standards in 23 years, and are expected to grow into large varieties in the future through product quality, pricing systems, and blood product sales resources; 2) Follow-up pipeline: MenAC has completed phase III clinical trials, and we expect to report production in 2024. DTAP is expected to be produced in 2024, and DTAP is expected to be produced in 2024. Launched phase III clinical trials; added a preclinical development project for recombinant shingles vaccine; 3) The company established an mRNA R&D platform to actively explore mRNA influenza vaccine research and development, and is currently in the early stages of research and development.

Net interest rate increased due to cost optimization and reduced impairment, and equity incentives stimulated internal vitality 1) gross margin remained flat in 2023, with sales/management/R&D expenses up +2.1/-2.3/-3.6 pct year on year, and net interest rate increased 7.2 pct; 2) the company accrued asset impairment losses of ~ 95 million yuan (150 million yuan in 2022); 3) operating cash flow increased 208% year on year to 890 million, mainly due to increased vaccine sales.

4) The company's equity incentive performance assessment target is based on 2021. The growth rate of deducted non-net profit from 2023 to 25 is not less than 40%/80%/100%, that is, 8.2/10.5/1.17 billion yuan of deducted non-net profit from 23 to 25.

We believe that the company's equity incentives cover the main core backbone and help stimulate internal vitality.

Risk warning: Influenza prevalence and product sales fall short of expectations, R&D progress falling short of expectations, risk of COVID-19 development and changes in prevention and control policies.