Event: The company's 2023 revenue +6.27%, net profit to mother -3.32%; 2024Q1 revenue -26.7%, net profit to mother -35.6%. The company's 2023 annual report achieved operating income of 1,064 billion yuan (+6.3% YoY) and net profit of 396 million yuan (YoY -3.3%); revenue for the fourth quarter of the year was -24.8% YoY, and net profit to mother -69.5% YoY. In 2024Q1, the company achieved operating income of 205 million yuan, -26.7% year-on-year; net profit to mother was 87 million yuan, or -35.6% year-on-year. The company's gross margin was -1.5pct/-9.0pct/-10.7pct to 72.1%/66.2%/66.6% year-on-year in 2023/2023Q4/2024Q1, respectively.
Affected by the farming cycle, 2024Q1 sales are under pressure: Following changes in the downstream farming cycle, the company's 2023H1 sales have resumed, and sales pressure has continued to increase since 2023H1. 1) In 2023, the company's pig vaccine revenue was +3.89% to 974 million yuan; sales of live pig vaccines +22.6%, sales of inactivated pig vaccines -9.2%; gross profit margin of pig vaccines was 73.98%, -1.33pcts year on year. Considering the customer's repayment situation, credit impairment losses of RMB 8037/5563/48,000 were carefully calculated in 2023/2023Q4/2024Q1. 2) Poultry vaccines and pet vaccines continued to be released. In 2023, the poultry vaccine achieved operating revenue of 15 million yuan, +44.2% year on year, gross profit margin of 36.82%, and +20.5 pcts year on year; pet vaccine achieved operating income of 12 million yuan, +74.3% year on year, gross profit margin of 31.7%, and +33.3 pcts year on year.
The company's large single products maintain a competitive advantage and are rich in product reserves under development: 1) The company's main single product continues to maintain a strong competitive advantage. The company's pig pseudorabies vaccine sales market share ranked first for seven consecutive years in 2016-2022, and the swine gastroenteritis and diarrhea double vaccine market share ranked first in China for 4 consecutive years in 2019-2022; the main categories of diarrhea and cirrhosis vaccines also maintained a relatively good trend; 2) The company has obtained 23 national invention patents in 2023, and 17 new national invention patents have been applied for. As of 2024Q1, the company pig The delta coronavirus inactivated vaccine has obtained a new veterinary drug certificate, the round branch double inactivated vaccine has completed the review of the new veterinary drug. The live Mycoplasma bovine vaccine, the pig stomach-abdominal-delta coronavirus triple inactivated vaccine, and the swine fever pseudocephalic double Asian unit inactivated vaccine are in the new veterinary drug registration stage; 3) Potential large single products are expected to open up the company's long-term growth space. As of 2024Q1, the company's triple live cat inactivated vaccine is in the laboratory stage; research on the live African swine fever vector vaccine is progressing smoothly.
Investment advice: The company adheres to innovation leadership and has abundant research reserves, which is expected to further open up space for the company's future growth. We expect that in 2024-2026, the company will achieve operating income of 11.55/ 13.72/1,679 million yuan, net profit to mother of 449/5.35/ 655 million yuan, and PE corresponding to the closing price on April 29 will be 18.5/15.5/12.7 times, respectively, to maintain the “increase in holdings” rating.
Risk warning: New product promotion falls short of expected risk; market competition increases risk; risk of cooperative research and development; risk of livestock and poultry prices falling short of expectations.