1Q24 net profit is in line with our expectations

The company announced 1Q24 results: revenue of 787 million yuan, down 10.6% year on year; net profit to mother of 262 million yuan, down 25.56% year on year, corresponding to profit of 0.14 yuan per share, deducted non-net profit of 221 million yuan, down 19.66% year on year. Net profit was in line with our expectations.

Development trends

The year-on-year decline in 1Q24 revenue was mainly due to seasonal fluctuations in influenza vaccine sales. According to Hualan Vaccine's 1Q24 performance report, the 1Q24 Hualan vaccine revenue was 34.22 million yuan, down 76.36% year on year, net profit to mother was 38.59 million yuan, down 58.93% year on year. Non-net profit deducted from mother was 14.16 million yuan, down 79.19% year on year. According to the company's disclosure, 1Q24 influenza vaccine sales declined year-on-year, but due to better sales repayments to recover bad debt from accounts receivable, 1Q24 confirmed revenue of 33.91 million yuan, an increase of 61.41% over the previous year. According to the batch issuance data of the China Inspection Institute, the first batch of the company's influenza vaccine was issued in April, earlier than June of last year.

Excluding revenue from the vaccine sector, we calculated that the company's 1Q24 revenue from blood products and other sectors was 753 million yuan, an increase of 2.5% over the previous year, mainly due to the high demand base in 1Q23. As of April 2024, the company has 32 single plasma collection stations (including sub-stations), mainly distributed in Henan, Chongqing, Guangxi, Guizhou, etc. Among them, the Dengzhou plasma station was mined in February 2024, and the Xiangcheng County and Qi County plasma stations are proceeding with the construction of single plasma collection stations according to the plan. The company expects 1H24 to be completed and approved. The company's pulping volume in 2023 was 1,342 tons, up 19.59% year on year. We expect that with the new pulping station being put into use, the company's pulp collection capacity is expected to increase further.

Others: 1) In terms of profit margin and expense ratio, 1Q24's gross profit margin was 55.7%, down 7.4ppt year on year, sales expense ratio 5.7%, down 1.5ppt year on year, management expense ratio 9.2%, increase 1.8ppt year on year, R&D expense ratio 9.2%, increase 0.4ppt year on year. 2) In terms of research and development, the company announced that its 10% intravenous human immunoglobulin program and human coagulation factor IX project are in clinical trials. The freeze-dried group A group C meningococcal conjugate vaccine company is expected to declare production in 2024.

Profit forecasting and valuation

We maintain our 2024/2025 net profit forecast unchanged. The current stock price corresponds to 20.1 times the 2024 price-earnings ratio and 17.3 times the 2025 price-earnings ratio. We maintain the “outperform the industry” rating. We maintain our target price of 24.2 yuan, which corresponds to a price-earnings ratio of 26.3 times 2024 and a price-earnings ratio of 22.6 times 2025, with 30.5% upside compared to the current stock price.

risks

Changes in industry policies, negative public opinion on the quality and safety of clinical products, national priority monitoring and rational drug use may lead to a decline in demand, seasonal fluctuations in influenza vaccine sales, and the extent of collection and price reductions exceeding expectations.