Event: The company released its 2023 Annual Report & 2024 First Quarter Report. The company's revenue in '23 was 1,253 billion yuan, +1.84% year on year; net profit to mother was 175 million yuan, +3.99% year on year; net profit after deduction was 154 million yuan, -0.17% year on year. Among them, 23Q4 had revenue of RMB 324 million, or -19.53% YoY; net profit to mother was RMB 0.05 billion, which changed from profit to loss year over year (RMB 41 million for the same period in '22). Dividend plan:
Dividend of 4 yuan (tax included) for every 10 shares. The 24Q1 company's revenue was 235 million yuan, -23.27% year on year; net profit to mother was 0.27 million yuan, or -57.36% year on year; net profit after deduction was 0.27 million yuan, or -56.10% year on year.
The company's revenue and profit both grew in '23, and 24Q1 performance was under pressure. The main reason why the company's performance continued to grow in '23 was the implementation of the company's “big customer” and “big single product” strategies, which achieved remarkable results, continuously optimized the product structure, and effectively controlled sales expenses, etc., which withstood the adverse effects of the slump in some downstream aquaculture markets and increased competition in the animal insurance industry. The company's comprehensive gross profit margin in '23 was 61.01%, -1.75pct year on year; the cost ratio for the period was 43.74%, -1.58pct year on year. The 24Q1 company's comprehensive gross profit margin was 64.41%, +5.43pct year on year; the cost ratio for the period was 49.87%, +13.96pct year on year, mainly due to a sharp increase in management expenses.
Revenue from poultry vaccines and chemicals increased in 23 years, and the gross margin of pig seedlings increased. Looking at the company's three main businesses, the company's pig vaccines, poultry vaccines, and chemicals achieved revenue of 434 million yuan, 416 million yuan, and 379 million yuan respectively, -5.92%, +10.20%, and +10.14%; accounting for 34.67%, 33.18%, and 30.24% of total revenue; gross margins were 83.89%, 55.34%, and 42.18%, compared with +2.39pct, +0.32pct, and -2.42pct. The 24Q1 pig vaccine, poultry vaccine, and chemical drugs achieved revenue of 75 million yuan, 92 million yuan, and 54 million yuan respectively, or -25.08%, +7.53%, and -52.80% compared with the same period last year; accounting for 31.81%, 39.15%, and 22.92% of total revenue. The company adheres to the “all categories” strategy. On the basis of improving the layout of existing pig and poultry products, the company actively lays out companion animals, ruminants, and fur animal products to enrich the product structure. 24Q1 company's ruminant vaccine revenue was +148% quarterly, achieving good growth. Currently, the company has 6 production bases and 60 production lines, and has production capacity to produce more than 70 kinds of biological products and more than 200 kinds of chemicals for pigs, poultry, and pets. Considering the expected increase in pig prices in the future, the company guarantees sales or benefits.
Adhering to R&D and innovation, the pet sector is expected to develop collaboratively. The company's R&D expenses in '23 were 101 million yuan, +9.15% year-on-year, accounting for 8.07% of total revenue, and +0.7pct compared to the same period last year. In '23, the company obtained 3 national new veterinary drug registration certificates, including the porcine parvovirus bacuvirus vector inactivated vaccine (PPV-VP2 strain); obtained clinical trial approvals for 4 vaccine products, including the trifecta vaccine for dogs; and obtained 13 invention patents. In terms of the anti-plague vaccine, the non-plague subunit vaccine developed by the company in cooperation with the Lan Research Institute entered the Ministry of Agriculture and Rural Affairs for emergency evaluation. In the pet sector, the company's triple inactivated vaccine for cats has passed an emergency evaluation and obtained a temporary veterinary drug product approval number. The company completed the acquisition of Pet Health and Hip Pet Network in '23, and is expected to achieve collaboration and sustainable development in the pet sector in the future. In addition, the company's P3 laboratory obtained the CNAS accreditation certificate in January '24 and is applying for approval from the Ministry of Agriculture and Rural Affairs for testing activities on highly pathogenic pathogenic microorganisms, which is expected to further enhance the company's core competitiveness.
Investment advice: The company has strong R&D capabilities and rich product reserves. As prices in the downstream aquaculture industry improve, vaccine sales will benefit significantly, and the company's potential performance growth can be expected. We expect the company's EPS in 2024-2025 to be 0.65 yuan and 0.83 yuan respectively, corresponding PE will be 28 and 21 times higher, maintaining the “recommended” rating.
Risk warning: animal disease risk; policy and regulatory risk; risk of increased market competition; product development risk; product quality risk, etc.