Matters:
The company disclosed its 2023 annual report, which achieved full-year revenue of 1,064 million yuan, a year-on-year increase of 6.27%, a year-on-year decrease of 3.32%, net profit after deducting 371 million yuan, a year-on-year decrease of 2.79%; the fourth quarter achieved revenue of 237 million yuan, a year-on-year decrease of 24.82%, and net profit to mother of 38.51 million yuan, a year-on-year decrease of 69.46%, after deducting net profit of 30.88 million yuan.
Commentary:
Vaccines for pigs have remained stable, and the growth rate of poultry seedlings, pet vaccines, etc. is outstanding. With pig prices falling sharply year on year, the company's core business, pig vaccines, remained stable, achieving annual revenue of 974 million yuan, up 3.9% year on year; other businesses blossomed. Among them, poultry vaccine revenue was 15.29 million, up 44.2% year on year, pet vaccine revenue was 11.77 million, up 74.3% year on year, diagnostic agents were 25.98 million, up 34.2% year on year, and microecological preparations were 34.36 million, up 43.1% year on year. In addition, by channel, direct sales revenue was 698 million, up 2.6% year on year, and distribution revenue was 329 million, up 12.0% year on year.
The gross margin of pig seedlings declined slightly, and the impact of depreciation dragged down profit levels. In 2023, the company achieved gross profit margin of 72.09%, yoy-1.52pct, of which, pig seedlings gross profit margin was 74.0%, yoy-1.3pct, gross profit margin 36.8%, yoy+20.5pct, pet vaccine gross profit margin 31.7%, yoy+33.3pct, diagnostic agent gross profit margin 68.0%, yoy+0.8pct, microecological formulation gross profit margin 53.7%, yoy-5.0pct. By channel, direct sales gross profit margin is 76.8%, yoy-0.7pct, distribution gross margin 64.3%, yoy-1.5pct. On the profit side, due to financial problems with some leading farming group customers, the company deducted accounts receivable. The total annual credit impairment loss was 80.37 million yuan, an increase of nearly 57 million yuan over the previous year, of which 23Q4 credit impairment losses were 55.63 million yuan, a record high in a single quarter, an increase of nearly 41 million yuan over the previous year, dragging down the company's annual performance.
Continue to promote the upgrading of research, production and marketing, and consolidate the position in the pig fry market. ① On the R&D side, the company continues to increase research and development. Over the past 3 years, it has invested more than 270 million yuan in R&D expenses. Last year, 11 new veterinary drug registration certificates were declared, 2 new veterinary drug certificates were obtained, and the cat triple inactivated vaccine passed the emergency review. ② On the production side, the vaccine production process is more automated and intelligent. Key technologies common to various industries, such as full-suspension serum-free culture technology for large-scale bioreactors, carrier suspension culture and amplification technology, have been further improved and applied, and vaccine safety, efficacy, stability and production efficiency have been greatly improved. ③ On the sales side, we continue to deepen accurate marketing strategies and develop separate development strategies for customers of different sizes. In particular, for large farming groups, we implemented the 13111 and “Three Views” working models and adopted one-on-one accurate services. The share of direct sales revenue remained stable at 60% + during the reporting period. The competitiveness of the company's various products continues to strengthen. According to the announcement, in '22, the company's five pig seedlings, including pseudo-rabies, diarrhea, diarrhoea, B, and mycoplasma, ranked first in the industry, and their market share increased significantly.
Investment advice: Short-term fluctuations do not hinder long-term value. We are optimistic about the company's performance flexibility from the perspective of pig cycle reversal, and maintain strong ratings. Looking ahead to 2024, as pig production capacity continues to decline in the early stages, the second half of the year is expected to usher in a cycle reversal, driving a recovery in demand for sports protection products. Based on the company's early research and development, it is expected that this year will usher in steady growth in performance with the launch of new products such as the round branch two-link, cat triplet, and porcine ding-type coronavirus vaccine. Taking into account the pace of pig prices and the pace of new product launches, we adjusted the forecast for 24-25 net profit of 474 million yuan and 600 million yuan (previous values were 6.48 million yuan, 766 million yuan), and introduced a 26-year forecast of 706 million yuan. Referring to comparable company valuations and the company's historical valuation level, we gave 25 times PE in 24 years, adjusted the target price of 25.5 yuan, and maintained a “strong push” rating.
Risk warning: The recovery in farming sentiment falls short of expectations, progress in new product development falls short of expectations, competition intensifies, etc.