Core views
On April 25, the company released the 2023 Annual Report and 2024 Quarterly Report. In 2023, the tetanus vaccine continued to maintain its leading position in the industry, and sales grew steadily; the company launched a pre-encapsulated dosage form, which is expected to further boost product sales. The company signed an AC combined agency agreement with Keyuan Trading, which is expected to drive sales growth of AC conjugated vaccines in the future. The company continues to invest in research and development. The mid-clinical phase III clinical analysis of the Staphylococcus aureus vaccine is in line with expectations, and the adult vaccine and superbug vaccine pipelines continue to be enriched to support future long-term development.
occurrences
The company released its 2023 annual report, and the performance was in line with expectations
On April 25, the company released its 2023 annual report, which achieved: 1) operating income of 496 million yuan, a year-on-year decrease of 9.38%; 2) net profit of 0.18 million yuan, a year-on-year decrease of 33.94%; 3) net profit after deducting non-return to mother of 0.03 billion yuan, an increase of 370.10% year-on-year; 4) basic earnings per share of 0.04 yuan. The results were in line with previous expectations.
In 2023, the company plans to distribute a cash dividend of 0.38 yuan (tax included) to all shareholders for every 10 shares, for a total of 15 million yuan (tax included).
The company released its 2024 quarterly report, and the performance fell short of expectations
On April 25, the company released its report for the first quarter of 2024, achieving: 1) operating income of 70 million yuan, up 5.87% year on year; 2) net profit of 0.26 million yuan, down 774.61% year on year; 3) net profit without return to mother of 0.28 million yuan, down 1047.15% year on year; 4) basic earnings per share -0.06 yuan. The results fell short of previous expectations.
Brief review
Main products maintained steady growth. 24Q1 R&D investment increased in the fourth quarter of 2024, and the company achieved operating income of 144 million yuan, a year-on-year decrease of 18.61%; net profit to mother -0.13 million yuan, a decrease of 6.41% year-on-year; net profit after deducting non-return to mother - 0.16 million yuan, and loss contracted 54.64% year-on-year. The company's overall revenue side declined slightly in 2024. Among them, adsorbed tetanus vaccine sales maintained steady growth, while sales of the Hib and AC combination vaccines fell short of expectations due to intense market competition. There was a significant year-on-year decline in profits attributable to the mother, mainly due to a reduction in government subsidies, which led to a decrease of 12 million yuan in non-recurring profit and loss compared to '22. The profit side increased sharply year on year after deducting non-current profit and loss, mainly due to: 1) the company strengthened repayment management, and credit impairment losses decreased year on year; 4) sales expenses fell year on year. 24Q1's revenue side continued to grow steadily. The decline on the profit side was mainly due to the addition of 20 million yuan in quadrivalent influenza technology transfer fees and 190 million yuan in phase IV clinical costs for the AC conjugate vaccine.
Sales of tetanus vaccine have been growing steadily, and the introduction of new dosage forms has further boosted sales. In 2023, the company continued to promote the sales of adsorbed tetanus vaccine. The annual adsorbed tetanus vaccine achieved revenue of 463 million yuan (+5.78%), a gross profit margin of 96.24% (+0.55pct), and maintained steady sales revenue and gross margin. In recent years, various industry expert consensus, prevention specifications, usage guidelines, diagnosis and treatment specifications have been issued one after another. As more doctors and patients understand the importance of active tetanus immunization in preventing tetanus, product sales are expected to continue to grow in the future. In 2023, the adsorbed tetanus vaccine was approved to add a “pre-filled” package to the existing packaging form “Xilin bottle”, which enriched the company's adsorbed tetanus vaccine dosage forms and further met the diverse needs of the market. At the same time, the price is expected to increase compared to the original dosage form, further boosting sales revenue.
AC combined with Hib sales declined, and an AC integration agency agreement was signed with Keyuan Trading. In 2023, the company's Hib vaccine sales revenue was 0.27 million yuan (-50.10%), gross profit margin 78.36% (-8.89pct); AC conjugate vaccine sales revenue was 0.04 billion yuan (-95.43%), and gross profit margin -95.43% (-171.92pct).
The decline in sales revenue is mainly due to fierce market competition. The decline in gross margin is mainly due to: 1) relatively high cost sharing due to falling revenue; 2) AC conjugate vaccines won bids for Class I vaccines in some regions, and the prices are lower. In order to strengthen marketing efforts, the company signed an agreement with Keyuan Trade, a subsidiary of Shanghai Pharmaceutical Group, to entrust Keyuan Trade to carry out exclusive marketing services for AC conjugate vaccines nationwide from 2024-2026, which will help increase sales of AC conjugate vaccines and complement the company's performance.
The R&D pipeline continues to be rich, and the phase III clinical phase analysis of the Staphylococcus aureus vaccine is in line with expectations. The company is committed to technological innovation and product development, focusing on adult vaccines and superbacterial vaccines, and the R&D pipeline continues to be rich. The company continues to advance phase III clinical trial studies of recombinant Staphylococcus aureus vaccine and complete mid-term analysis. Continue to advance clinical research based on the findings of the DSMB Mid-Term Analysis Recommendation Report received. At the same time, the company continues to strengthen the layout of innovative vaccines for infectious diseases in hospitals, and has signed contracts and established projects with technical partners for Pseudomonas aeruginosa vaccine and recombinant Acinetobacter baumann protein vaccine. In terms of other pipelines, applications for clinical trials of quadrivalent influenza virus lytic vaccine (MDCK cells) have been accepted, and research and development of innovative products such as oral recombinant Helicobacter pylori vaccine (Escherichia coli), recombinant Pseudomonas aeruginosa vaccine, and group A streptococcus vaccine is progressing in an orderly manner.
Sales repayments improved in '23, and R&D expenses were phased up in 24Q1. In 2023, the company achieved gross profit of 464 million yuan (-8.71%) and a gross profit margin of 93.55% (+0.68pct), which remained stable. The company's annual sales expenses were 256 million yuan (-10.60%), sales expense ratio 51.97% (-0.71 pct); management expenses of 0.78 million yuan (+23.01%), management expenses rate of 51.97% (+4.16pct); R&D expenses of 115 million yuan (-5.95%), R&D expenses rate of 23.13% (+0.84pct); financial expenses of 0.05 billion yuan (+257.25%), financial expenses ratio of 0.94% (+0.70pct). The various cost rates have remained stable. The company's net operating cash flow in 2023 was 44 million yuan, compared to the same period in '22 - 25 million yuan, mainly due to the increase in sales repayments received by the company. The company's credit impairment in 2023 was $0.2 billion (same period in '22 - $12 million). The decrease was mainly due to the company's enhanced repayment management.
2024Q1 has a gross profit of 65 million yuan (+9.60%) and a gross profit margin of 92.43% (+3.14pct). First quarter sales expenses of RMB 0.24 billion (-14.36%), sales expense ratio of 33.79% (-7.98pct); management expenses of RMB 0.29 million (+231.42%), management expenses ratio of 41.57% (+28.29pct); R&D expenses of RMB 48 million (+155.98%), R&D expenses rate of 67.43% (+39.54pct); financial expenses of RMB 0.02 billion (+245.45%), financial expenses ratio of 3.22% (+2.23pct). R&D expenses rose sharply year on year, mainly due to the increase in R&D investment due to additional quadrivalent influenza technology transfer fees and phase IV clinical costs for the AC conjugate vaccine. 2024Q1 net operating cash flow of -65 million yuan, compared to -33 million yuan for the same period in '23, mainly due to lower revenue and increased expenses.
2024 outlook: Tetanus vaccine is expected to maintain steady dosage. It is expected that Staphylococcus aureus phase III clinical development company will maintain its leading position in the industry for a long time as an innovative vaccine research and development company. In 2024, it is expected that it will continue to maintain steady dosage under the impetus of various diagnostic and treatment guidelines, expert opinions, and the company's sales team; pre-filled dosage forms are more expensive to meet the needs of different groups of people and contribute additional performance. The company's Staphylococcus aureus phase III clinical progress is progressing smoothly. The mid-term data analysis results are in line with expectations. We look forward to seeing more new developments in 24 and promoting product listing as soon as possible. The company has a rich R&D pipeline and broad prospects for future long-term growth.
Profit Forecasts and Investment Ratings
We expect the company to achieve operating income of 609 million yuan, 688 million yuan and 928 million yuan respectively, and net profit to mother of 0.29 million yuan, 44 million yuan and 80 million yuan respectively, up 63.9%, 52.9% and 81.1% year-on-year respectively. Equivalent EPS is 0.07 yuan, 0.11 yuan and 0.20 yuan/share, respectively, corresponding PE is 126.2X, 82.6X and 45.6X respectively. The purchase rating is maintained by comprehensively considering the progress of the company's R&D pipeline and its commercialization value.
Risk analysis
1. Risk that R&D progress falls short of expectations: Product development is critical to the future development of vaccine companies. The company currently has several vaccine research pipelines, and the progress in the research pipeline is lower than expected, which may affect the company's future sales expectations, which in turn affects the valuation.
2. Risk of vaccine product sales falling short of expectations: Adsorbed tetanus vaccine is the company's main product. If product sales do not meet expectations, it will affect corporate revenue and profit expectations, which in turn affects valuation.
3. Vaccine management compliance risk: Because vaccines have special biological characteristics, their regulatory requirements are more strict and the scope of management is more extensive. If vaccine companies violate operating compliance requirements, not only will the operation and production of the company itself be adversely affected, but it may also cause fluctuations in the vaccine industry.