Incidents:

On March 30, the company released its 2023 annual report: the company achieved revenue of 5.342 billion yuan (+18.26%) and net profit to mother of 1,482 million yuan (+37.66%); of these, 23Q4 achieved revenue of 1,429 billion yuan (+56.23%) and net profit to mother of 414 million yuan (+135.85%) in a single quarter.

The company's performance was in line with expectations. Fluctuations in single-quarter results were mainly affected by the pace of influenza vaccine batch issuance and sales.

The amount of pulp collected increased rapidly, and blood products achieved steady growth:

In 2023, the company added 4 new pulp stations, with an annual pulping capacity of 1,342 tons, an increase of 19.59% over the previous year. The blood products sector achieved revenue of 2,926 billion yuan (+9.22%), of which albumin, isopropyl and other blood products achieved revenue of 1,057 billion yuan (+6.97%), 845 million yuan (+8.96%), and 1,025 million yuan (+11.87%), respectively. With the gradual increase in the amount of pulp collected, the product side achieved good growth. The gross margin of the blood products business was 54.34%, an increase of 2.04 pp over the previous year, and profitability increased. It is expected that demand for jingjing and other product terminals will continue to be strong, and the products will maintain high prices. With the resumption of pulping activities and mining at new pulp stations, the company's pulp collection volume is expected to maintain high growth in the past three years, laying a solid foundation for subsequent product-side releases and driving steady growth in the blood products sector. In terms of production capacity, the company's intelligent production base has been completed, making sufficient preparations for the subsequent increase in pulp collection.

There was a year-on-year increase in influenza vaccines, and the vaccine pipeline was further enriched:

In 2023, the company's vaccine sector achieved revenue of 2,405 billion yuan (+32.30%), mainly contributed by influenza vaccines. Throughout the year, quadrivalent influenza for adults, quadrivalent influenza for children, and trivalent influenza were issued in 73 batches, 15 batches, and 6 batches respectively, maintaining the leading position of domestic influenza vaccines. Domestic vaccination rates for influenza vaccines are still low, and there is plenty of room for growth. In 2023, the company's rabies vaccine and tetanus vaccine have been marketed and issued one after another. The product range continues to be enriched, and it is expected that they will be gradually released in the next year.

R&D is progressing steadily, focusing on shareholder feedback:

The company has a number of products under development: in terms of blood products, high-concentration hydroxyacetamol, Exendin-4-FC fusion protein, and human coagulation factor are in clinical trials; in terms of vaccines, the freeze-dried group A group C meningococcal conjugate vaccine has completed phase III clinical trials; the participating company Hualan Gene's bevacizumab has submitted an application for marketing registration, and 10 other products have obtained clinical approval. The company pays attention to shareholder feedback and issued the “Shareholder Return Plan for the Next Three Years (2024-2026)”, which indicates 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 the cash dividend meets the cash dividend conditions, the annual cash dividend amount for 2024-2026 should not be less than 30% of the net profit achieved for the current year or 30% of the total net profit for the year 2024-2026. In 2023, the company distributed a cash dividend of 3 yuan (tax included) to all shareholders for every 10 shares, for a total of 548 million yuan.

Profit forecasts and investment suggestions:

We expect the company's net profit to be returned to mother in 2024-2026, respectively

16.88/19.16/2.145 billion yuan, corresponding EPS is 0.92/1.05/1.17 yuan, respectively, and the current stock price corresponding PE is 21.85/19.26/17.20 times, respectively. The company's blood products business has resumed good growth, driven by a rapid increase in plasma collection. The leading position for influenza vaccines is stable, and it is expected to benefit from the increase in influenza vaccination rates to achieve steady growth. First coverage, giving a “buy” rating.

Risk warning:

The amount of pulp collected falls short of the expected risk; the risk of product sales falling short of the expected risk; the launch of a new product falls short of the expected risk.