Incidents:

On October 25, 2024, the company released its three-quarter report for 2024: the company's operating income for the first three quarters of 2024 was 4.073 billion yuan (yoy +1.28%), net profit to mother 1.052 billion yuan (yoy +18.52%), after deducting non-return net profit of 1.044 billion yuan (yoy +18.68%). In Q3 2024, the company's revenue was 1.232 billion yuan (yoy -7.44%), net profit due to mother 0.326 billion yuan (yoy +1.57%), after deducting non-attributable net profit of 0.32 billion yuan (yoy +0.04%).

Investment highlights:

The company's Q3 2024 revenue was under pressure and profits were stable. The company's revenue for the first three quarters of 2024 was 4.073 billion yuan (yoy +1.28%), net profit to mother 1.052 billion yuan (yoy +18.52%), after deducting non-attributable net profit of 1.044 billion yuan (yoy +18.68%).

In 2024, Q3's revenue was 1.232 billion yuan (yoy -7.44%), net profit due to mother 0.326 billion yuan (yoy +1.57%), after deducting non-attributable net profit of 0.32 billion yuan (yoy +0.04%).

The company's gross margin increased and sales expense ratio decreased in 2024Q3, driving a year-on-year increase in net profit margin. The company's gross margin for Q3 2024 was 54.54%, up 2.76 year on year; sales expenses ratio was 0.74%, down 2.70pct year on year; management expense ratio was 9.14%, up 0.58pct year on year; net profit margin was 35.87%, up 3.31 pct year on year.

With an epitaxial merger and acquisition, the company acquired Wuhan Zhongyuan Reed. In August 2024, the company announced in the same month that it plans to acquire 100% of Wuhan Zhongyuan Reed's shares for a total amount of 0.185 billion US dollars, of which 0.1378 billion US dollars is consideration for the share purchase and 0.0472 billion US dollars is a loan to Wuhan Zhongyuan Reed. Wuhan Zhongyuan Reed's main business is blood products. It has 5 wholly-owned pulp stations, and collected a total of 112.37 tons of pulp in 2023. This acquisition will help the company further develop plasma resources, expand its scale and production scale, and enhance the company's overall competitive strength in the blood products industry.

Profit forecast and investment rating We expect revenue for 2024/2025/2026 to be 5.452 billion yuan/6.421 billion/ 7.587 billion yuan, corresponding net profit to mother of 1.359 billion yuan/1.629 billion/ 1.989 billion yuan, corresponding PE 32.45X/27.06X/22.17X. We believe that the company is a leading blood products company with a state-owned background, and is developing steadily endogenously and externally. First coverage, giving a “buy” rating.

Risks suggest that product sales and promotion fall short of expectations, product development progress falls short of expectations, pulping station approval progress falls short of expectations, progress in new production capacity construction falls short of expectations, progress in mergers and acquisitions falls short of expectations, and product quality risks.