24H1 achieved revenue of 18.258 billion yuan. In the first half of 2024, the company achieved operating income of 18.258 billion yuan, a year-on-year decrease of 25.31%; net profit to mother was 2.234 billion yuan, a year-on-year decrease of 47.55%. Looking at the second quarter of a single quarter, the company's revenue was 6.863 billion yuan, a year-on-year decrease of 48.29%, and realized net profit to mother of 0.777 billion yuan, a year-on-year decrease of 65.14%. The company's marketing efforts in some regions and products fell short of expectations, and the sales volume of the company's main products declined compared to the same period last year.

Sales of the shingles vaccine continue to advance. Since January 2024, the company has continued to promote the import, batch issuance, market access, promotion and sales of products. As of the first half of 2024, the recombinant shingles vaccine has covered more than 20,000 end users across the country, and the breadth and depth of coverage has increased significantly. From January to June 2024, the company issued 1.6069 million shingles vaccine batches. We believe that the shingles vaccine has a huge capacity in the domestic market and is expected to contribute new increases to the company's performance growth.

Efficiently advance the research pipeline and accelerate the introduction of new products. In the first half of 2024, the company made positive progress in several ongoing research projects: 1) the quadrivalent recombinant norovirus vaccine (Pichia yeast) entered phase III clinical trials; 2) the 26-valent pneumococcal conjugate vaccine entered phase I/II clinical trials. If the project progresses smoothly, it will have a synergistic effect with the 23-valent pneumococcal polysaccharide vaccine already marketed by the company and the 15-valent pneumococcal conjugate vaccine currently in clinical phase III; 3) The quadrivalent influenza virus lytic vaccine (pre-encapsulated packaging) has passed the registration site verification and is in the technical review stage; 4) The company is actively promoting the marketing approval of this product; 4) The clinical trial application for the influenza virus lysis vaccine (ZFA02 adjuvant) has been accepted. Currently, no adjuvant influenza vaccine has been officially approved for marketing in China.

Profit forecasting and valuation. We expect the company's net profit to be 6.974 billion yuan, 8.175 billion yuan, and 10.929 billion yuan in 2024-26, respectively, up -13.5%, 17.2%, and 33.7% year-on-year respectively. Referring to comparable companies, Wantai Biotech and Kangtai Biotech's 2024 PE was 154 times and 16 times, respectively. The company is a vaccine leader with excellent R&D, production and sales in China. We gave the company a 2024 P/E of 10 to 12 times, a reasonable value range of 29.14 to 34.96 yuan, and a market value of 697 to 83.7 billion yuan, and a “superior to the market” rating.

Risk warning. HPV vaccine revenue declined, shingles vaccine doses fell short of expectations, and independent product development failed or delayed.