Incident: The company released its 2023 annual report, achieving operating income of 357 million yuan (-65.5%), net profit of 1.48 billion yuan, net profit deducted from non-mother of 16.1 billion yuan, increased losses, and achieved net operating cash flow of -9.1 billion yuan.

Sales of the COVID-19 vaccine declined, and the release of the MCV4 vaccine accelerated. On a quarterly basis, the company's 2023Q1/Q2/Q3/Q4 revenue was 1/-0.8/1.5/180 million yuan (-80%/-157%/+93%/-44.5%), respectively, and net profit to mother was -1.4/-7/-1.4/-5 billion yuan, respectively. The decline in the company's revenue is mainly due to a decrease in demand for COVID-19 vaccines in the domestic market. In terms of cost ratio, the company's sales expense ratio was 98.97% (+73.2pp), mainly due to the continuous promotion of the influenza vaccine; the management expense ratio was 80.23% (+54.24pp), the financial expense ratio was -15.77% (+2.09pp), the R&D cost rate was 178.67% (+103.45pp), and the absolute R&D cost was 640 million yuan (-18%), mainly due to the reduction in investment in COVID-related projects, non-COVID-19 projects accounted for more than 70%; asset depreciation of 970 million yuan compared to the previous period The increase of $170 million was mainly due to the company's preparation for impairment of inventory, receivable return costs, prepaid accounts, and long-term assets showing signs of impairment.

Commercialization of the MCV4 vaccine is progressing rapidly. In 2023, the MCV4 vaccine and MCV2 vaccine achieved revenue of 560 million yuan (+266.4%), and commercialization progressed rapidly. The COVID-19 vaccine was worth RMB 37 million (-96.86%), and revenue of RMB 0.1 billion was achieved through sales of raw materials, technology transfer and service provision. At the same time, the company calculated and reduced the relevant revenue of RMB 250 million during the reporting period based on actual and anticipated returns of COVID-19 vaccine products.

The research pipeline is progressing smoothly, and the variety of products continues to be rich. The marketing application for the 13-valent pneumonia vaccine in the pneumonia pipeline has been accepted by the CDE, and the PBPV vaccine phase Ib clinical trial site work has been completed; component 100: all subjects were enrolled in the Phase III clinical trial for infants and children, and all subjects were enrolled in the TTCP phase 1 clinical trial for adolescents and adults; recombinant shingles vaccine: Canada has initiated clinical phase I of the clinical phase I vaccine; the MCV4 vaccine has started clinical phase I; the tetanus vaccine has entered clinical phase 3; the MCV4 vaccine has been expanded to phase 3; the MCV4 vaccine has been expanded to the clinical phase 3 group Group completed.

Profit forecast: As the first quadrivalent meningitis conjugate vaccine in China, the company's MCV4 vaccine has strong product strength and is expected to quickly occupy the market. EPS is expected to be -0.67 yuan, -0.2 yuan, and 1.09 yuan respectively in 2024-2026.

Risk warning: risk of MCV series launch falling short of expectations; risk of R&D falling short of expectations or R&D failure; risk of deterioration in product competition pattern.