In the short term, as 24H2 pig prices enter an upward cycle, demand for animal insurance is expected to pick up. Pig prices have continued to be low since 23 years, and the downstream pig farming industry has been losing money for 15 consecutive months. The decline in pig production capacity continues to accelerate under the influence of three factors: financial pressure, pessimistic expectations, and the epidemic. It is expected that as 24H2 pig prices enter an upward cycle, industry demand will improve markedly. As the listed animal insurance company with the highest share of pig vaccine revenue (over 90%), the company will benefit greatly. In the long run, policies and breeding planning jointly drive increased industry concentration, and non-plague vaccines and pet vaccines bring incremental opportunities. 1) On the policy side, the new version of GMP certification favors the clearance of backward production capacity in the industry, and the complete withdrawal of government procurement in '25 is beneficial to increasing the share of enterprises in the market.
2) The trend of large-scale farming has been established. Large-scale farms tend to procure brands and high-quality products with guaranteed quality, which is beneficial to increasing industry concentration. 3) The potential market space for non-plague vaccines is over 10 billion dollars. Domestic cat trifecta will soon begin import substitution. Two major potential single products will drive the expansion of the industry.
The company's core products have significant competitive advantages, and the release of strong R&D strength and production capacity supports long-term performance growth. 1) Product: In 2022, the market share of the company's three core products, pseudorabies vaccine/diarrhoea double vaccine/round vaccine, was 49.10%/57.47%/22.52% respectively, ranking first/first/second, all of which established a certain leading edge. The company is also laying out two major potential single products, the anti-plague vaccine and the feline triple vaccine.
The company's non-plague vaccine has two technical routes: subunits and live carriers. Currently, all related products are undergoing emergency evaluation. The company's triple vaccine for cats has obtained an approval number and will soon be marketed for circulation. 2) R&D: A high-quality R&D team leads the company to continue to innovate, and rich research reserve projects provide strong support for the company's future development. 3) Production capacity: The full release of production capacity has opened up room for the company's long-term growth.
Investment advice: The company's revenue for 2024-2026 is expected to be $1,26/15.10/1,687 billion yuan, respectively, +19.0%/+19.3%/+11.7% year over year; realized net profit to mother is 4.91/567/648 million yuan, respectively, +24.1%/+15.5%/+14.2% year over year; corresponding EPS is 1.05/1.22/1.39 yuan. Considering that 2024H2 pig prices are expected to pick up and the company's leading position in the pig fry industry without forcible exemption, coverage was given to the company for the first time, giving the company a “buy” rating.
Risk warning: risk of major animal diseases, risk of a sharp drop in pig prices, risk of new product launches falling short of expectations, increased risk of industry competition, etc.