Core investment logic: Blood products are an industry with scarce resources. The industry barriers are high, and the scale and number of varieties of pulp collection directly determine the size of the company. We believe that under the general trend of increasing industry concentration, central enterprise holdings have an advantage. The company 1) is the core blood products platform under Sinopharm Group, and is expected to continue to expand epitaxial and endogenous; 2) It is the industry leader in the number of plasma stations and pulp collection scale, and is the industry leader; 3) The product pipeline is the most comprehensive, covering three categories and 15 varieties, and has the first domestically produced fourth-generation 10% high-concentration chromatographic isopropyl. Furthermore, in September 2023, recombinant human coagulation factor VIII was approved, continuously expanding new growth points from blood source to recombination. Currently, blood products are still booming. The demand side is highly deterministic due to ageing+increased awareness, and supply-side barriers are high. As an industry leader, Tiantan Biotech has both growth potential and high certainty, which is worth focusing on.

The scale of pulp harvesting has led the industry for a long time and continues to grow. The company is a leader in blood products. It was founded in 1998, and the controlling shareholder became Zhongsheng Group in 2006. In 2017-2018, Tiantan Biotech divested vaccine assets and acquired Zhongsheng's high-quality blood products assets through the group's internal asset integration, becoming the only blood products platform under Zhongsheng. In 2023, the middle school student won a controlling interest in Weiguang Biotech again, and it is expected that it will further smooth out the competitive relationship with the company in the future. The number of the company's plasma stations grew rapidly during the 14th Five-Year Plan period. As of March 2024, the total number of the company's plasma collection stations was 102 (80 in operation), spread across 16 provinces (autonomous regions) across the country. The number of plasma stations remained leading in the country, and the distribution range was wide. In 2023, the pulping volume reached a record high of 2,415 tons, accounting for about 20% of the industry's total slurry harvesting volume, up 18.67% year on year (industry growth rate 18.64%). 2024H1 Express reported revenue of 2.841 billion yuan, +5.59% year over year, net profit to mother of 0.726 billion yuan, +28.12% year over year. The performance was good. Considering the quarterly rhythm of the blood products industry, it is expected to achieve the annual operating target (revenue 6.126 billion billion, net profit 1.791 billion).

The three major production bases have been put into operation one after another, and the total production capacity is expected to exceed 5,000 tons. In 2021, the company raised 3.34 billion yuan through a non-public offering of shares for the construction of the three major factories. At present, the Chengdu Rongsheng Yong'an Plant has been put into operation, the Shanghai Blood Systems Yunnan Project has completed process verification, and the Lanzhou Blood Systems Lanzhou Project has completed the capping of the main workshop structure. In the future, as the Yunnan project and the Lanzhou project are gradually put into operation, the company will have three blood products production bases with a single plant with a spraying capacity of 1,200 tons, with a total production capacity exceeding 5,000 tons. The three major factories will work together to continuously improve the quality of the company's blood products business operations.

The product pipeline is the richest in China, and continuous R&D investment drives long-term development. The company currently has a total of three categories of products, including human blood albumin, human immunoglobulin, and human coagulation factors, 15 varieties, and 74 production numbers. The company adheres to an innovation-driven development strategy and invested 0.26 billion yuan in R&D in 2023. Currently, recombinant human coagulation factor VIIa and human immunoglobulin are being injected subcutaneously in phase III clinical trials; recombinant human coagulation factor VIII-FC is in clinical phase I; human prothrombin complex and human coagulation factor IX have been approved for drug clinical trials.

High-purity static acrylic and recombinant 8-factor relays were launched to create a new growth pole. Compared with the third generation, the fourth generation high-concentration isopropyl has a shorter production cycle, higher safety, and a wider range of indications. Since 2003, a number of fourth-generation JingC models have been listed abroad, and the six major domestic listed blood products companies all have research and development bureaus. On September 21, 2023, the first domestically produced fourth-generation high-concentration chromatographic isochromatography - Rongsheng Jing C? 10% is on the market, providing new clinical options. On September 5, 2023, the company's recombinant coagulation factor VIII was listed, ranking third in China. From hematogenesis to restructuring, the company continues to explore new growth points.

Profit forecast and investment rating: We expect the company's net profit to be 1.349, 1.627, and 1.938 billion yuan respectively in 2024-2026, up 22%, 21%, and 19% year-on-year respectively. The corresponding PE is 36X, 29X, and 25X, respectively. The corresponding PE is 36X, 29X, and 25X, respectively, covered for the first time, giving it a “buy” rating.

Risk warning: Industry policy risks, risks where the amount of pulp collected falls short of expectations, the risk of production capacity construction falling short of expectations, and the progress of products under development falls short of expectations.