Key points of investment:

Haier Group Holdings, the company embarked on a new journey: Shanghai Race was founded in 1988 and listed on the Shenzhen Stock Exchange in June 2008. After going public, the company successfully acquired blood products companies such as Zhengzhou Laishi, Tonglu Biology, Zhejiang Haikang, and Guangxi Guanfeng, which significantly increased the company's industrial scale and product variety, and became a blood products manufacturer with high comprehensive plasma utilization rate, complete product structure and variety, and leading quality in the same domestic industry. Haier Group became the main holding in July 2024, and Shanghai Race also officially became an important strategic layout for Haier Group's health sector from its previous status without an actual controller.

Comparing China and foreign countries, looking at the industry's development path: 1) The global blood products market is relatively mature, showing a typical oligopoly situation; the domestic blood market still has a lot of room for growth. Currently, there are less than 30 active companies, and industry concentration is expected to increase further. 2) China's per capita plasma supply is significantly lower than that of developed countries in Europe and America. Due to the high development requirements for single pulp collection stations in China and strict pulp donation regulations, there is currently a large gap in domestic plasma supply. In the future, with the increase in the number of pulping stations and the increase in the amount of pulp collected at a single station, there is huge room to increase the amount of pulp collected in China. 3) Global consumption of blood products is dominated by hydrochloric acid and coagulation factors, while China is dominated by human blood albumin. As blood product manufacturers pay more attention to the development of static propionate and coagulation factors, and clinicians' awareness increases, the clinical application of static propionate and coagulation factor products is expected to expand further, and demand is expected to increase at an accelerated pace.

Resource development+output improvement to help the company grow: Pulp harvesting resources and tons of slurry output are the main factors affecting the profits of blood products companies. Shanghai Race's pulp collection volume exceeded 1,500 tons in 2023. It has 44 single plasma collection stations, leading the number of plasma stations in the country. At the same time, it is eligible to apply for new plasma stations and operates across multiple provinces, providing greater possibilities for the company to expand its new plasma stations. Judging from the pulping volume of a single station, the company's average pulping capacity in a single pulping station in 2023 was 39 tons, and there is still plenty of room to improve excavation. In addition, the company has a rich product range. Currently, it has 12 product approvals, of which 11 products are in production, the product structure is balanced, and it has the exclusive product freeze-dried human fibrin binder currently sold domestically. As the product line of its subsidiaries is replenished in the future and the launch of new self-developed products, the company's slurry revenue and profit are expected to increase further.

Profit forecast and valuation: We forecast that the company's revenue for 2024-2026 will be 8.69/9.64/10.659 billion yuan, up 9.1%/10.9%/10.6% year on year; net profit to mother will be 2.33/2.614/2.916 billion yuan, respectively, up 30.9%/12.2%/11.6% year on year. We selected 5 listed blood products companies, including Tiantan Biology, Hualan Biotech, and Pailin Biotech, as comparable companies, and gave the Shanghai Race industry an average of 23 times PE, corresponding to a target market value of 53.8 billion yuan in 2024, with 23% upward space compared to the current market value. The number of Shanghai Rice pulp stations, pulp collection volume, and number of product approvals all rank in the first tier of the blood products industry in China. After Haier Group joined, it changed the company's previous situation where there was no actual controller. It is expected to bring new impetus to the company's growth, coverage for the first time, and give it a “buy” rating.

Risk warning: The construction progress of the new pulping station and the amount of pulp collection fell short of expectations; risk of impairment of goodwill; the marketing progress and marketing of products under development fell short of expectations.