Performance summary: The company released its 2023 annual report. In 2023, the company achieved revenue of 1,064 billion yuan, +6.27% year-on-year, and realized net profit to mother of 396 million yuan, -3.32% year-on-year. Among them, 2023Q4 achieved revenue of 237 million yuan, or -24.82% year-on-year; net profit to mother of 39 million yuan, or -69.46% year-on-year.
Comment: Vaccines for pigs drive revenue growth, and calculation of impairment affects profits. In 2023, the company's pig vaccine achieved revenue of 973 million yuan, +3.89% year over year, mainly driven by a 23% increase in sales of live vaccines for pigs (sales of inactivated pig vaccines fell 9%). The year-on-year growth rate for poultry vaccines and pet vaccines was over 17%. Entered a period of volume growth. However, against the backdrop of both the price and cost of pig vaccine products being pressured, the company's gross margin fell 1.33pp to 74% year on year in 2023. Combined with factors such as the company's impairment losses, the net profit attributable to the mother declined slightly. 23Q4 The poor pig price season and lack of confidence on the breeding side caused the company's pig vaccine product sales to decline quite clearly under a high base.
Promote technological innovation and build the company's core competitiveness. During the reporting period, the company continued to increase R&D investment. R&D expenses were 885,5053 million yuan, and R&D investment accounted for 8.32% of revenue. In 2023, the company obtained a total of 2 new veterinary drug registration certificates for the swine epidemic diarrhea virus ELISA (IgA) antibody test kit and canine coronavirus colloidal gold test slip; obtained 7 clinical trial approvals such as swine fever, swine pseudorabies double Asian unit vaccine, and porcine parvovirus disease subunit vaccine. Furthermore, the company continued to increase the construction of platforms for CHO, baculovirus vectors, and Escherichia coli, and initially established platforms for mRNA vaccines and recombinant adenovirus vector vaccines. In terms of anti-plague vaccine research and development, the company's live vector non-plague vaccine submitted for emergency evaluation in December 2023, and supplementary experiments are currently being carried out in an orderly manner based on feedback.
Production capacity on the aquaculture side continues to decline, and the reversal of the cycle has led to a sharp rise in volume and price in the sports insurance sector. In 2023, pig prices continued to be sluggish, and downstream demand was cautious. According to data from the Ministry of Agriculture and Rural Affairs, the number of breeding sows nationwide was 40.42 million in February 2024, down 0.6% from the previous month and 6.9% from the previous year. Since 2024, pig prices have not declined during the off-season, and an upward trend has been established. In the future, the trend of average pig prices and sector profit levels will improve, driving demand for sports insurance, and sales and net interest rates in both directions. On the other hand, research on non-plague vaccines is progressing steadily. If commercialization is successfully achieved in the future, new products will drive market expansion. The scale of the pet consumer market continues to grow, and the domestic replacement of pet vaccines in China is being promoted at an accelerated pace due to new products.
Profit forecasting and investment advice. We expect the company's EPS to be 1.26, 1.52, and 1.71 yuan from 2024 to 2026, corresponding to 15.6, 13, 11.5 times dynamic PE, maintaining a “buy” rating.
Risk warning: Risks such as outbreaks of outbreaks in aquaculture, downstream demand falling short of expectations, and R&D progress falling short of expectations.