Incident: Wantai Biotech released its 2024 quarterly report. In the first quarter of 2024, the company achieved operating income of 753 million yuan, a year-on-year decrease of 73.93%; net profit to mother was 126 million yuan, a year-on-year decrease of 89.90%; net profit after deducting non-return to mother was 49 million yuan, a year-on-year decrease of 95.90%. The large decline in the company's revenue and profit was mainly due to factors such as the expansion of the nine-valent HPV vaccine, market competition, and inventory reduction, and sales fell short of expectations.

Actively promoting the procurement and overseas distribution of bivalent HPV vaccines, IVD routine business revenue has increased.

Since 2023, sales of the company's bivalent HPV vaccine have been affected by increased competition, etc. In response, the company adjusted its market strategy in due course, focused on differentiated advantages to consolidate market share, participated in welfare projects in various provinces, and won bids for government projects in Hainan Province, Jiangsu Province, Guangdong Province, and Tibet. At the same time, the company vigorously expanded overseas markets and increased cooperation with international organizations such as GAVI, the Gates Foundation, and WHO. The company successfully completed vaccination of appropriate age women in Thailand, Nicaragua and other countries during the year. The listing licenses in Cambodia, Ethiopia, Kazakhstan, Kenya, and Burkina Faso, which are in the process of registration in about 17 countries, will help the company's internationalization process. In the IVD sector, benefiting from the acceleration of major projects such as assembly lines, the company actively cooperated with the country's top 300 hospitals to eliminate COVID-19 diagnosis-related businesses. The IVD sector's business revenue increased by 12% over the same period last year. 2024Q1

Research and development of various products, such as the nine-valent HPV vaccine, is progressing smoothly, and performance increases can be expected. (1) In terms of vaccine products: The company's nine-valent HPV vaccine completed the V8 sample test according to the plan in April 2024. The main analysis data was accumulated to the number of persistent cases of persistent infection in December as planned. The main results were in line with expectations; the company is simultaneously preparing application materials for new drug registration while advancing follow-up clinical work, and will actively communicate with the drug regulatory department on reporting matters. The results of a comparative study on immunogenicity between the company's nine-valent HPV vaccine and Jiadaxiu's 9-head immunogenicity show that the two are similar. The development progress is leading among domestic manufacturers. If successfully approved for marketing, it is expected to benefit more women of appropriate age. In addition, the company's traditional chickenpox vaccine has obtained phase III clinical trial research reports; the novel chickenpox vaccine (VZV-7D) has completed phase II clinical trials; and the 20-valent pneumonia vaccine has been enrolled in all phase I clinical trials in February 2024. (2) In vitro diagnostic products:

By the end of 2023, research and development of innovative testing markers for nasopharyngeal cancer and products related to hepatitis E antigen, the company's key projects are progressing in an orderly manner; 6 nucleic acid products have entered the clinical stage, and the eugenics and nurturing series projects have completed clinical trials one after another and are about to enter the registration phase. After the research products are launched one after another, it will further enrich the company's vaccine product line and enhance the company's competitiveness.

Investment advice: Increase holdings - An investment rating of A. Referring to the average marketing review time of vaccines, the sales situation and pricing strategy of the currently marketed HPV vaccines, and the gross margin level of non-immunization plan vaccines on the market forecast the future contribution of the nine-valent HPV vaccine. The company's revenue growth rates from 2024 to 2026 are expected to be -39.9%, 14.5%, and 186.4%, respectively, and the net profit growth rates are -54.0%, 39.6%, and 461.7%, respectively; with reference to comparable company conditions in the same industry, the current business valuation is 20 times that of 2024. 11.489 billion yuan. Referring to the Frost & Sullivan report, it is assumed that the domestic HPV vaccine can reach a cumulative vaccination penetration rate of more than 50% among women of appropriate age. Under these circumstances, the company's nine-valent HPV vaccine is expected to reach a peak sales value of 22.8 billion yuan, giving a 4-fold PS multiple and a 90% success rate. The corresponding valuation is 81.9 billion yuan. Taken together, the company's overall valuation is 93.389 billion yuan, and the target price for 6 months is 73.64 yuan.

Risk warning: The marketing progress of the nine-valent HPV vaccine falls short of expectations, the HPV vaccine market penetration rate falls short of expectations, product marketing and sales fall short of expectations, the risk of increased market competition, and the expansion of international business falls short of expectations.