Introduction to this report:

The company's 2024Q2 performance recovered strongly, and the price increase of Jingbing drove the growth of 2024H1 performance. A healthy balance sheet indicates performance sustainability and maintains an increase rating.

Key points of investment:

Maintain an increase in holdings rating. Maintain the 2024-2026 EPS forecast of 0.71/0.89/1.07 yuan. Refer to comparable company valuations to give the 2025 PE 31X, maintain the target price at 27.59 yuan, and maintain an increase in holdings rating.

The impact of batch issuance disruptions was eliminated, and Q2 recovered strongly. The company achieved revenue of 2.841 billion yuan (+5.6% YoY, same below), net profit of 0.726 billion yuan (+28.1%), net profit of 0.723 billion yuan (+29.4%); 2024Q2 achieved revenue of 1.619 billion yuan (+15.8%) in a single quarter, net profit of 0.409 billion yuan (+34.3%), net profit to mother of 0.409 billion yuan (+34.3%), net profit of 0.41 billion yuan (+33.9%). The cancellation of the simultaneous batch issuance policy at the end of 2023 led to a year-on-year decline in 2024Q1 revenue, and the Q2 revenue side achieved a strong recovery.

The increase in the price of Jing Bing drove the 2024H1 performance growth, and a healthy balance sheet indicates that the performance is sustainable.

By product, albumin achieved revenue of 1.114 billion yuan (-6.9%), static propylene (including chromatography) achieved revenue of 1.339 billion yuan (+22.0%), and other blood products achieved revenue of 0.378 billion yuan (-2.6%).

With strong market demand compounded by sales policy adjustments, the average selling price of products such as Jingjing and other products rose, driving the company's revenue growth. At the same time, the gross margin increased by 7.13pp to 55.67% year-on-year, and the net sales margin increased by 5.91 pp to 34.68%. The balance sheet is healthy. Bills receivable and accounts receivable have fallen to around 0.1 billion yuan at the end of three consecutive quarters (2023Q2-2024Q2 accounts receivable at the end of the quarter were 9.12, 4.88, 0.094, 0.11, and 0.119 billion yuan, respectively). At the same time, inventory reached a record high of 3.138 billion yuan, reflecting sufficient raw plasma and products, laying the foundation for subsequent sales.

Pulp production continues to grow, and new varieties are being launched one after another to boost profitability. Relying on the influence and comprehensive advantages of shareholders of central enterprises, the company is leading in the pulping resources industry. As fresh pulping stations continue to mine and climb slopes and stock slurry stations excavate, 2024H1 pulping continues to grow rapidly. 80 companies collect 1,294 tons of pulp at pulp stations, an increase of 15% over the previous year, and 22 pulping stations are expected to be built one after another, laying the foundation for continued growth in pulping volume. Research and development of new varieties is also progressing steadily. Rong Sheng's first domestic chromatography was approved in September 2023, Rong Sheng Fibran was approved in April 2024. The clinical and application work of Lanzhou Blood PCC and Rongsheng Subcutaneous Gambyl injections is progressing steadily, and the profitability of tonne pulp is expected to continue to increase in the future. In terms of recombinant products, recombinant factor 8 was approved in September 2023. Clinics of recombinant factor 7a and long-term recombinant factor 8 are progressing steadily and are expected to contribute new growth points.

Risk warning: changes in terminal supply and demand, new product promotion and sales fall short of expectations