Event: The company released its 2023 Annual Report & 2024 First Quarter Report. The company's revenue in '23 was 1,598 million yuan, +4.55% year on year; net profit to mother was 284 million yuan, +34.64% year over year; net profit after deduction was 255 million yuan, +29.74% year on year; net operating cash flow was 415 million yuan, +20.36% year over year.
Among them, 23Q4 had revenue of 379 million yuan, or -9.76% year on year; net profit to mother was 0.05 billion yuan, which changed from profit to loss year over year (0.1 million yuan for the same period in '22). Dividend: A dividend of 0.8 yuan (tax included) for every 10 shares. 24Q1's revenue was $348 million, -4.42% year on year; net profit to mother was 106 million yuan, -1.05% year on year; net profit after deduction was 95 million yuan, -5.32% year on year.
The company's revenue & profit increased in 23 years, and the 24Q1 performance was steady. Against the backdrop of sluggish downstream aquaculture and increased competition in the animal insurance industry in '23, the main reasons for the company's performance growth were optimization of the product structure and remarkable results in improving quality and efficiency. The company's comprehensive gross profit margin in '23 was 59.19%, +4.02pct year on year; the cost ratio for the period was 36.42%, +3.09pct year on year. The 24Q1 company's comprehensive gross profit margin was 60.80%, +1.10pct year on year; the cost ratio for the period was 26.35%, +2.36pct year on year.
The gross margin of government harvesting has increased markedly, and the growth rate of large pig seedlings is remarkable. Against the backdrop of the overall contraction of the government procurement industry in recent years, the company's government procurement achieved revenue of 286 million yuan, a slight increase of 1.61% year over year, mainly due to the impressive increase in sales of the company's ruminant seedlings. Among them, the vaccine against the disease vaccine and the bovine vaccine achieved sales volume of 144 million heads and 6.31 million ml respectively, +8.32% and +22.89% over the same period last year. The gross margin of the company's government procurement in '23 was 54.45%, +9.63pct. The gap with the market's gross margin gradually narrowed, mainly due to the optimization of the company's product structure, and the rapid development of high-margin products (such as M5-90△26, Rev.1, and the upcoming S19 strain). In terms of pig seedlings, the company continues to consolidate its leading position in the foot-and-mouth disease market and increase the share of non-foot-and-mouth disease products. In '23, the large single pig round vaccine and the round branch vaccine achieved sales volume of 5929 and 28.13 million milliliters respectively, +24.57% and +109.25% compared with the same period last year. Considering the expected rise in the downstream aquaculture industry, steady growth in the company's performance can be expected.
Continued investment in research and development, the world's first animal mRNA vaccine production workshop passed static inspection. In '23, the company invested 230 million yuan in R&D, +4.55% over the same period, mainly due to increased investment in non-epidemic projects, etc.; accounting for 14.39% of total revenue, which is at the leading level of the industry. In '23, the company obtained 2 new veterinary drug registration certificates for live brucellosis vaccine (Rev.1 strain) and mycoplasma pneumoniae inactivated vaccine (ZY), and will lay out more than 40 new vaccines in the next five years. In terms of the progress of the non-plague vaccine, the company's non-plague subunit vaccine was submitted to the Ministry of Agriculture and Rural Affairs for emergency review in '23 and entered the efficacy evaluation stage. In terms of R&D equipment, the company's P3 laboratory has obtained qualifications for non-fever, foot-and-mouth disease, swine fever virus, brucella, bovine nodular skin disease, etc., which supports the company's continuous development of new products. In addition, the world's first animal mRNA vaccine production workshop invested by the company passed static inspection by the Ministry of Agriculture and Rural Affairs in early '24. The company will register and declare multiple mRNA vaccines in '24, further improving the company's R&D competitiveness.
Investment suggestion: The company deepens the “product+solution+service” three-dimensional smart epidemic prevention system. On the basis of consolidating the market share of foot-and-mouth disease vaccines, the company continues to increase sales revenue for non-foot-and-mouth disease vaccines. Combined with abundant reserves of new products, the company's performance growth can be expected. We expect the company's EPS in 2024-2025 to be 0.33 yuan and 0.39 yuan respectively, corresponding to PE of 27 and 23 times, maintaining the “recommended” rating.
Risk warning: risk of recurrence of downstream farming epidemic; risk of product development falling short of expectations; risk of product quality; risk of market competition, etc.