Non-profit deduction fell 20% in 1Q24

The company announced 1Q24 revenue, return to mother, and non-net profit of 7.9, 260 million yuan, and 220 million yuan, down 11%, 26%, and 20% year-on-year. The main reason was that vaccine companies returned to a normal pace in the first quarter, that is, no influenza vaccine sales, 1Q23 one-time asset disposal revenue, and net interest rates on blood products fell slightly. Benefiting from the increase in pulp collection and the recovery of influenza vaccines, we expect a net profit of 17.9/21.7/2.62 billion yuan (21%/21% yoy) to the mother in 2024-26, giving a PE valuation of 25x in 2024 (comparable to the company's 2024 average PE average expectation of 23x, given a certain premium considering the upward elasticity of the blood products and vaccine business), and a target price of 24.42 yuan to maintain the “buy” rating.

Blood products were relatively stable in the first quarter, and vaccines returned to normal

We estimate that 1Q24 revenue for blood products was 750 million yuan (+2% yoy, +2% qoq), net profit of 240 million yuan (-18% yoy, -9% qoq), the decline was mainly due to disposal of physical assets in the same period last year, deducting 210 million yuan (-8% yoy, -5% qoq), and the decline was mainly due to a decrease in gross margin (1.6 pct year-on-year decrease) and an increase in the cost ratio (the three-fee rate increased 2.5 pct year over year). Vaccine companies' revenue in 1Q24 was about 34 million yuan (1Q23 revenue of 140 million yuan), mainly due to the influenza outbreak in the spring of 1Q23, and the return to confirmed revenue due to pure sales reimbursement, while 1Q24 influenza vaccine demand was low and returning to normal. We think it is normal for influenza vaccines to be low in the first quarter (0.6%, 0.8%, and 6.0% of revenue for the first quarter of 2021 to 2023, respectively).

Blood products: plasma delivery is expected to accelerate in subsequent quarters

We expect blood products to accelerate in the next quarter. Revenue growth is expected to accelerate in 2024-26:1) Benefiting from the mining potential of old pulp stations and the mining of fresh pulp stations, we expect to collect 1590/1820 tons of pulp from 2024 to 2025, an increase of 19%/14% year on year. In addition, the company is actively pursuing the 15th Five-Year Plan to expand the Chongqing pulp station; 2) We expect plasma delivery volume to increase by 15 to 20% in 2024 (2023 plasma collection volume will increase by nearly 20% to about 1,340 tons), driving strong blood product revenue growth; 3) The plant area (with a design capacity of 1,860 tons of plasma) is expected to be put into operation in 2024, and the production capacity matches the long-term pulp collection capacity.

Vaccines: Vaccination demand is recovering throughout the year

We expect vaccine companies' revenue to increase 26% year-on-year to 3 billion yuan in 2024:1) The sales volume of influenza vaccines will exceed 19 million units in 2023, and we expect sales of influenza vaccines to exceed 23 million units in 2024; 2) 4 doses plus 5 doses of Vero vaccine (1M23 listing) and tetanus vaccine (1H23 listing) are expected to gradually contribute to the increase; 3) equity incentives will deduct the target value of 8.2/10.5/1.17 billion yuan from 2023 to 2025, and a trigger value of 7.7/9.6/1.05 billion yuan.

Risk warning: Blood sampling falls short of expectations, fluctuating prices of blood products, risk of substitution of recombinant blood products.