Key points of investment

The cat trifecta broke the monopoly of foreign brands, and the “Rui Meow Shu” independently developed by the company in 2023 was the first in China to propose an emergency evaluation, the first batch to pass the emergency evaluation, and obtained a temporary production number in January 2024. It achieved the first marketing and sale of the domestic cat triple vaccine, breaking the situation where companion animal vaccines have been dependent on imports for a long time. Since the company's cat triple vaccine was officially launched on the market at the end of January, Q1 has shipped 500,000 copies, with cumulative sales of about 12 million yuan, and terminals covered 4,600 pet hospitals. As of June 21, the company's cat trifecta had been issued 8 times, accounting for 16% of the entire industry, and marketing has progressed steadily.

A vaccine that is more suitable for domestic pet cats. The triple vaccine for cats created by the “Ruimioshu” brand influence company has three core advantages: 1) The new strain is more compatible and the protection is more effective. In 2013-2018, the company collected 6125 samples from 1000+ pet hospitals and kennels in 23 provinces and cities, and isolated 98 popular domestic strains as vaccine candidates. Among them, the cat calicivirus RPVF0207 strain can cross-protect classic strains and high-lethal strains, with strong cross-protection ability; 2) High antigen content, high antibody production, long duration, and good protective effect; 3) quadruple high purity, better quality, and less than 1/100,000 side effects. In June '24, “Rui Miu Shu” was the only officially designated vaccine for the FIFe China Cat Race, protecting professional cats and increasing its visibility in professional breeding circles. In the future, the company will promote products through various mainstream new media platforms, win the trust of pet doctors with product quality, establish the awareness of terminal owners in private areas, and expand the influence of products.

Build a pet industry ecosystem and set a new benchmark for the industry

The company implemented the strategy of “seizing opportunities for pet development, releasing product value, and building the number one brand in China”, set up a holding subsidiary, Lanrui Biotech to independently operate the pet sector business, cooperate deeply with Ruipai Pet Hospital and Sino-Swiss supply chain channels, and work together to vigorously promote domestic pet health products and further build an ecological pattern of pet medicine. At present, it has set up nearly 100 core dealers in all provinces and cities across the country. It has covered major Tier 1 and 2 cities across the country, covering more than 5,000 channel stores. In the future, the company will continue to optimize dealers and sink channels to prefecture-level cities; form a mutually beneficial and win-win mechanism with core dealers to deepen cooperation and bonds; strengthen the construction of academic conferences, specialist meetings, and round tables to empower dealers and strengthen communication with terminal pet hospitals and pet doctors. In addition, in 2024, the company plans to launch major products such as insecticides - compound dichlorophenetrine pyripropyl ether drops, cyclosporine oral solution, and upgraded rabies inactivated vaccine. In the future, there will still be new product layouts such as oral insect repellents, cat fever monoclonal, dog quadruplets, etc., to continue to develop the relay pet business.

Investment advice

We expect the company to achieve net profit of 519, 6.11, and 740 million yuan from 2024 to 2026, with year-on-year increases of 14.6%, 17.7%, and 21.2%, respectively, corresponding to PE 12, 10, and 9 times, respectively. Against the backdrop of increased overall operating pressure on the industry, the company controlled the long-term development direction. The traditional animal business grew steadily, and the emerging pet business stepped up its first-mover advantage and maintained a “buy” rating.

Risk warning: New product launch falls short of expectations, downstream cycle reversal falls short of expectations, outbreak of major animal diseases