Incidents:
On April 1, 2024, Keqian Biotech released its 2023 annual report: in 2023, the company achieved operating income of 1,064 billion yuan, +6.27% year-on-year, and net profit of 396 million yuan, or -3.32% year-on-year. Net profit after deducting non-return to mother was 371 million yuan, -2.79% YoY. 2023Q4 achieved operating income of 237 million yuan, or -24.82% year on year, realized net profit of 39 million yuan, -69.46% year on year, net profit of not attributable to mother of 31 million yuan, or -72.70% year on year.
Investment highlights:
Revenue from swine vaccines is growing steadily. The accrual of impairment losses dragged down the company's performance. In 2023, the company's pig vaccine business achieved sales revenue of 974 million yuan, an increase of 3.89% over the previous year. Due to the slump in pig prices in 2023, the gross margin of pig vaccines fell 1.33 percentage points. In 2023, the company accrued an impairment loss of 84.4743 million yuan in accounts receivable and a loss of 15.7932 million yuan in inventory price decline. Together, the two exceeded 100 million yuan. Large impairment losses led to a slight decline in the company's performance.
Join hands with Huazhong Agricultural University to promote research and development of an African swine fever vaccine. The company signed a joint development agreement with Huazhong Agricultural University in June 2023 for the “African Swine Fever Vaccine Research and Development” project. The two parties bear their own expenses during the collaborative research and development process, and the technical results and intellectual property rights generated by the cooperative R&D project are jointly owned by the company and Huazhong Agricultural University.
Driven by R&D, many products have entered the new veterinary drug declaration stage. The company has invested more than 270 million yuan in R&D expenses in the past three years. In March 2024, the company's porcine coronavirus inactivated vaccine (CHN-HN-2014 strain) obtained a new veterinary drug certificate. Two products, porcine circovirus type 2 recombinant baculovirus, mycoplasma porcine pneumonia double inactivated vaccine (KQ strain+XJ03 strain), and mycoplasma porcine pneumonia and haemophilus paraureus vaccine (XJ03 strain+MD0322 strain+SH0165) have completed the new veterinary drug review and are about to obtain a new veterinary drug certificate. The triple inactivated vaccine for feline rhinotracheitis, feline rhinoconjunctivitis, and feline panleukopenia passed the emergency review. The live Mycoplasma bovine vaccine (HB150 strain) has entered the review and testing phase.
Profit forecast and investment rating: The pig price center is expected to move upward in 2024. We will adjust the company's 2024-2026 operating income to 11.57, 13.18, and 1,545 billion yuan, up 8.74%, 13.94%, and 17.18% year on year; net profit to mother of 4.63, 5.80, and 679 million yuan, up 16.94%, 25.18%, and 17.24% year on year; corresponding to current stock price PE is 20 times, 16 times, and 13 times, respectively. Based on the continuous improvement of the company's product matrices for swine vaccines and pet vaccines, the “buy” rating is maintained.
Risks suggest the risk of a sharp drop in livestock and poultry prices; risk of major animal diseases; new product launches falling short of expectations; increased industry competition; and sales of swine vaccines falling short of expectations.