The profit side performed brilliantly. In 2023, the company achieved operating income of 5.342 billion yuan (+18.26%), net profit attributable to mother of 1,482 billion yuan (+37.66%), and net profit without return to mother of 1,267 billion yuan (+41.77%). Among them, Q4 achieved revenue of 1,429 million yuan (+56.23%), net profit to mother of 414 million yuan (+135.85%), and net profit after deducting non-return to mother of 361 million yuan (+166.87%) in a single quarter. The increase in the company's performance is expected to be mainly due to increased demand for blood products and influenza vaccines.

The blood products business grew steadily, and the volume of plasma stations and pulp collection increased rapidly. The company's blood products business achieved revenue of 2,926 million yuan (+9.22%); net profit of 902 million yuan (+23.87%); and gross profit margin of 54.34% (+2.04pct) in 2023. 1) Looking at specific products, human blood albumin, intravenous gammater, and other blood products earned 10.57 billion yuan (+6.97%), 8.45 (+8.96%), and 10.25 (+11.87%) respectively. 2) In terms of plasma station construction and plasma collection, the company currently has 32 single plasma collection stations (including sub-stations). In 2023, the plasma collection volume was 1342.32 tons, an increase of 19.59% over the previous year. During the reporting period, the company completed 4 plasma stations, including Huangchuan County and Shangshui County, and successfully obtained the “Single Plasma Collection License”. Dengzhou obtained the license in February 2024. The above plasma stations have all begun pulp collection. The Xiangcheng County and Qi County plasma stations are proceeding with the construction of single plasma collection stations according to the plan, and are expected to be completed and accepted in the first half of 2024. As the company's pulp collection volume continues to increase, the blood products business is expected to maintain good growth.

Influenza vaccines are growing rapidly, and the product line has been further enriched. The company's vaccine business achieved revenue of 2.405 billion yuan (+32.30%) and net profit of 860 million yuan (+65.49%) in 2023. The increase in vaccine sales is mainly due to the increase in people's willingness to get vaccinated against influenza, etc. The company issued a total of 94 batches of the 2023 influenza vaccine, including 73 batches of quadrivalent influenza vaccine (adult dosage form), 15 batches of quadrivalent influenza vaccine (children's dosage form), and 6 batches of trivalent influenza vaccine. As awareness of the influenza vaccine continues to rise, the company's products are expected to be further expanded. In February 2023, the company successively obtained “Drug Registration Certificates” for freeze-dried human rabies vaccine (Vero cells) and adsorbed tetanus vaccine. The product line has been further enriched, and the new products are expected to contribute to the company's performance growth.

The company attaches importance to shareholder returns and issues a 24-26 shareholder return plan. In 2023, the company plans to distribute a cash dividend of 3 yuan (tax included) to all shareholders for every 10 shares, totaling about 549 million yuan, accounting for 37% of net profit attributable to mother. In addition, the company recently released the “Shareholder Return Plan for the Next Three Years (2024-2026)”. It is planned that the annual cash dividend amount for 2024-2026 will not be less than 30% of the net profit achieved for the year 2024-2026, or the total amount of cash dividends for three years will not be less than 30% of the total net profit for 2024-2026 on the premise that the company is profitable and has no major investment projects, the cash can meet the company's continuous operation and long-term development, and meets the cash dividend conditions. The shareholder return plan shows the company's confidence in development, and the long-term investment value of the company is remarkable.

Investment advice: We will keep our 2024 and 2025 profit forecasts unchanged, and have added 2026 profit forecasts. We expect the company's revenue for 2024-2026 to be 66.27/77.97/8.850 billion yuan, respectively, net profit to mother of 17.56/21.18/2,453 billion yuan, corresponding EPS of 0.96/1.16/1.34 yuan, respectively, and corresponding PE 20.49/16.98/14.66 times, respectively. The company's blood products and vaccine business is developing steadily and maintains a “buy” rating.

Risk warning: risk of uncertainty in batch issuance and plasma collection of blood products; risk of influenza vaccine sales falling short of expectations; risk of drug development failure.