The company specializes in animal protection for livestock and poultry, and is actively expanding animal insurance for pets. The company's main business is the R&D, production and sales of veterinary biological products and veterinary chemicals, and the provision of overall animal disease prevention and control solutions. Since its establishment in 1998, the company started with the high-end veterinary formulation business. Since then, it has focused on the field of animal protection, actively carried out extended mergers and acquisitions, and continuously expanded and enriched the animal insurance business layout. In 2023, the company's revenue reached 2,249 billion yuan (CAGR was 11% in the past 10 years). The revenue scale was second only to China Animal Husbandry Co., Ltd. among domestic animal insurance companies, and has become one of the largest livestock and poultry insurance companies with the most complete products in China. In recent years, the company's pet animal protection division has entered the harvest period. Various products, such as the self-developed cat triple vaccine, have been approved and marketed one after another, and it is expected that they will continue to contribute to growth in the future.
Livestock and poultry protection business: Actively expanding the Group's customers, which is expected to benefit from an improvement in downstream farming. In terms of growth, as one of the largest and most comprehensive animal insurance enterprises in China, the company is investing ahead of its peers on the R&D side, the product matrix is constantly being enriched, and the channel side cooperates more and more closely with large-scale farming enterprises. Under the wave of large-scale farming, the direct sales model revenue directly established with breeding groups is expected to continue to expand.
In terms of cycle, due to reduced production capacity and the epidemic in the north, pig prices showed strong off-season characteristics after the Spring Festival this year. Judging from the decline in production capacity since last year, we believe that the pig cycle has entered the right side. Pig prices are expected to start rising in the middle of the year, and it is expected that the poultry industry will recover at the same time. Following the recovery of cash flow and profit from downstream farming, farmers' demand for medication is expected to improve. At that time, the sales scale and profit performance of the company's livestock and poultry protection products are expected to continue to improve from the bottom up.
Pet care business: New products are being launched intensively, and the sector has entered the harvest period. In terms of products, the company's product matrix is constantly rich, and it already has the ability to provide overall prevention and treatment solutions from prevention, diagnosis to treatment. The products cover 9 major fields, including biological products, chemicals, and nutritional health products, with a total of more than 20 pet products.
In terms of channels, the company has laid out a sales channel moat for “high-quality distributors+Sanrui Qifa (deep collaboration between the company, Ruipai Pet Hospital, and Sino-Swiss supply chain channels)”. In terms of large single products, the trifecta vaccine “Ruimiushu” developed by the company was officially launched on the market in 2024Q1, achieving sales revenue of 12 million yuan. In the future, it is expected to rely on channel advantages for rapid distribution, which in turn will drive the company's pet sector's revenue scale to a new level.
Profit forecast and valuation: As one of the largest animal insurance companies in China, Ripu Biotech is expected to benefit from a recovery in downstream livestock and poultry farming in the future. At the same time, the pet sector is expected to open up a new curve for the company. The company's net profit for 2024-2026 is estimated to be RMB 5.3/63/650 million (+16%/20%/3% YoY), and EPS of RMB 1.1/1.3/1.4, respectively. Through multi-angle valuation, we expect the reasonable valuation range for the company's stock to be between 17.8-19.1 yuan. There is room for a 20% to 30% premium compared to the current stock price, giving it a “superior to the market” rating.
Risk warning: Potential risks caused by uncontrollable animal outbreaks; risk that large-scale downstream farming processes fall short of expectations; risk that vaccine wholesale progress falls short of expectations.