Incident: The company released its 2024 quarterly report. In the first quarter of 2024, the company achieved operating income of 787 million yuan, a year-on-year decrease of 10.60%; realized net profit to mother of 262 million yuan, a year-on-year decrease of 25.56%; and realized deduction of 221 million yuan in non-net profit, a year-on-year decrease of 19.66%.

Vaccine business: Batch issuance began in Q2 and peaked in the second half of the year. The influenza business is clearly seasonal. Basically, sales began at the end of Q2 and the beginning of Q3, and sales peaked in Q3/Q4. At present, the company's influenza vaccine has begun to be distributed in batches. We expect batch issuance and terminal vaccination of influenza vaccines to pick up in '24. In the long run, awareness of influenza vaccines continues to rise, the penetration rate of influenza vaccines is expected to continue to increase in the future, and the company is expected to continue to grow rapidly as a leader in influenza vaccines.

Blood products business: It is expected to remain stable throughout the year. Last year, the blood products business formed a high base due to COVID-19 in Q1, and profits in the blood products business fluctuated. In 2022, the company was approved for 7 new pulping stations. This is the first time since 2018 that new pulping stations have been approved on a large scale. Beginning in the second half of '23, as newly approved plasma stations began to contribute plasma volume, the company's blood product plasma volume and performance will begin to shift at an accelerated pace in the second half of '23. The approved new pulp station is expected to increase the amount of pulp collected and the scale of revenue, and further open up room for blood products to grow.

Sales rates declined due to changes in business, and inventory remained stable. The 2024Q1 company's sales expenses were 45 million yuan (-29.27%), and the sales rate was 5.68% (-1.50pp). Last year's Q1 influenza vaccine sales led to a high base of sales expenses last year. Management expenses of 73 million yuan (+11.22%), management fee rate 9.24% (+1.81pp). R&D expenses of 0.73 billion yuan (-6.27%), R&D expenses 9.24% (+0.43pp). Finance rate -0.37% (-0.51pp). The company's inventory balance at the end of the 2024Q1 inventory period was $1,923 million, accounting for 11.82% of assets (+0.95pp).

Profit forecast and investment advice: The company's revenue for 2024-2026 is expected to be 61.30, 72.16, and 8.499 billion yuan, respectively, up 14.75%, 17.72%, and 17.78% year on year. Net profit to mother is 17.41, 20.60, and 2,413 billion yuan respectively, up 17.51%, 18.32%, and 17.12% year on year. The company is one of the leading blood products. Continued increase in awareness of the quadrivalent influenza vaccine has led to continued rapid dosage and maintained a “buy” rating.

Risk warning: Risk of fluctuations in the price of blood products, risk of falling short of expectations in pulp collection, risk of increased competition for quadrivalent influenza vaccine, risk of falling short of expectations in monoclonal antibody business development.