Key points of investment:

Incident: The company released its 2023 annual report. The company achieved operating income of 5.342 billion yuan (+18.26% year over year), realized net profit attributable to mother of 1,482 billion yuan (+37.66% year over year), and realized net profit deducted from mother of 1,267 billion yuan (+41.77% year over year).

Q4 achieved operating income of 1,429 million yuan (YoY +56.23%), realized net profit of 414 million yuan (YoY +135.85%), and realized net profit of 361 million yuan (+166.97% YoY). The performance was in line with expectations.

Blood products: Improved supply and demand have led to an increase in gross margin, and the establishment of a new plasma station frees up space for pulp collection. In 2023, the company's blood products division achieved revenue of 2,926 billion yuan (+9.22%), of which human albumin revenue was 1,057 billion yuan (+6.97%), static propylene revenue was 845 million yuan (+8.96%), and revenue from other blood products was 1,025 million yuan (+11.87%). In 2023, the gross margin of human albumin increased by 7.32 pct year on year, and the gross margin of static propylene increased by 1.74 pct year on year. Mainly due to the high incidence of respiratory diseases after the epidemic, demand for human blood albumin and static acrylic was high, and prices increased. The company's pulp collection volume in 2023 was 1342.32 tons (+19.59% year over year). The plasma stations in Huangchuan County, Shangshui County, Xiayi County and Yichuan County were completed and successfully obtained the “Single Plasma Collection License”. The implementation of the new pulp station combined with the excavation of the old pulp station will further open up the growth of the blood products sector.

Vaccines: The number of influenza vaccines issued is leading domestically, and the vaccine product line is gradually being enriched. In 2023, the vaccine sector achieved revenue of 2,405 billion yuan (+32.30%). The company obtained a total of 94 batches of influenza vaccine batches, including 73 batches of quadrivalent influenza vaccine (adult dosage form), 15 batches of quadrivalent influenza vaccine (children's dosage form), 6 batches of trivalent influenza vaccine, and batch issuance of quadrivalent influenza vaccine and influenza vaccine continued to maintain its leading position in the country. At the same time, products under development are being promoted steadily. In February 2023, vaccine companies successively obtained “Drug Registration Certificates” for freeze-dried human rabies vaccine (Vero cells) and adsorbed tetanus vaccine, further enriching the product line.

Pay attention to shareholder returns and publish shareholder return plans for the next three years. On March 29, the company announced the “Company's Shareholder Return Plan for the Next Three Years (2024-2026)”. It is planned that on the premise that the company is profitable and has no major investment projects, that cash can meet the company's continuous operation and long-term development, and that cash meets the cash dividend conditions, the annual cash dividend amount from 2024 to 2026 will not be less than 30% of the net profit achieved in the current year or the total amount of cash dividends for three years will not be less than 30% of the total net profit for the three years. The dividend ratio has been increased, and emphasis is placed on shareholder returns.

Profit forecasting and investment ratings. We maintain our previous profit forecast. We expect the company's 2024-2025 net profit to be 1,754.1,962 billion yuan, adding to the 2026 profit forecast. The estimated net profit to mother is 2.188 billion yuan, corresponding to the 2024-2026 EPS of 0.96/1.07/1.20 yuan, respectively, maintaining the “increase” rating.

Risk warning: The supply of pulp collected falls short of expectations, sales of the quadrivalent influenza vaccine fall short of expectations, and the risk of collecting blood products.