Key points of investment

The results were generally in line with expectations. In 2023, the company achieved operating income of 3.477 billion yuan (+10.14%), net profit of 861 million yuan (+749.02%), net profit of non-return to mother of 722 million yuan (+495.11%); of these, 2023Q4 achieved operating income of 1,013 million yuan (+71.01%), net profit to mother of 164 million yuan (+148.91%), and net profit without return to mother of 123 million yuan (+137.83%). In 2024Q1, we achieved operating income of 452 million yuan (-39.65%), net profit attributable to mother of 54 million yuan (-73.69%), and net profit of 14 million yuan (-92.42%) after deducting non-return to mother. The company's performance grew well in 2023, and the high profit side growth was mainly due to impairment related to the same period last year. The decline in 2024Q1 performance is expected to be mainly affected by multiple factors such as a high base for the same period in 2023, and the company's performance is expected to improve quarter by quarter.

The 13-valent pneumonia vaccine is growing rapidly, and the amount of human diploid vaccine can be expected. In 2023, the company's routine vaccines (excluding COVID-19 vaccines) achieved sales revenue of 3.05 billion yuan, an increase of 18.98% over the previous year. Specifically, 1) The estimated revenue of the 13-valent pneumonia vaccine is about 1.5 billion yuan, an increase of 55.64% over the previous year. We believe that the domestic market is expected to maintain rapid growth; in overseas markets, the company has signed cooperation agreements with more than 10 countries, obtained marketing approval in Indonesia in October 2023, and the company has signed “sales contracts” with Indonesian partners. It is expected that the continued expansion of overseas markets will become a new important growth point. 2) Quadruple Seedling's revenue is expected to exceed 1 billion yuan, and the overall growth trend is steady. 3) The hepatitis B vaccine is expected to maintain good growth as the share of revenue from high-margin varieties increases; the 23-valent pneumonia vaccine increased 36.88% year on year, showing a rapid growth trend. During the reporting period, the company's human diploid vaccine and live attenuated varicella vaccine were officially approved for marketing. Among them, the human diploid vaccine was approved for the “5-dose method” and the “four-dose method”. The market space is broad and the competitive pattern is good, and it will become the company's new major varieties.

The R&D pipeline continues to be rich. During the reporting period, the company invested 542 million yuan in R&D, accounting for 15.59% of revenue; the company made positive progress in many of its products under development: 1) the Sabin strain polio inactivated vaccine (Vero cells) production registration was accepted; 2) the adsorbed acell-free proteinoclysis vaccine (component) combination vaccine has completed phase I clinical trials and is in phase III clinical preparation; 3) adsorbed tetanus vaccine and quadrivalent influenza virus lysis vaccine are in phase I and III clinical trials; 4) oral pentavalent recombinant vaccine (Vero cells) In phase I and phase II clinical trials Phase; 5) The five-dose vaccine and the adsorbed acell-free leukocytosis inactivated polio vaccine are in phase I clinical trial; 6) The measles combined live attenuated vaccine and the 20-valent pneumococcal polysaccharide conjugate vaccine have obtained drug clinical trial approval notices.

Investment advice: Taking into account emerging population factors, industry competition factors, etc., we have appropriately lowered the profit forecast for 2024 and 2025, and introduced a profit forecast for 2026. We expect the company's revenue for 2024-2026 to be 47.77/59.54/7.220 billion yuan, respectively, net profit to mother of 11.92/15.41/19.58 billion yuan, corresponding EPS of 1.07/1.38/1.75 yuan, respectively, and corresponding PE 19.09/14.76/11.62 times, respectively. The company's 13-valent pneumonia vaccine is growing rapidly, and the release of the human diploid vaccine can be expected. The overall development trend is good, and it maintains a “buy” rating.

Risk warning: risk of vaccine price reduction; risk of product sales falling short of expectations; risk of iterative technology upgrades.