Why are 2024Q1 company accounts receivable and inventories rising?
(1) The rise in 2024Q1 company accounts receivable is related to seasonal factors. Since 2023Q4, the company's accounts receivable have begun to decline. Currently, the company's accounts receivable turnover days (162 days) is significantly lower than that of peers. We believe that the risk of the company not being able to pay back is low, but in the short term, fluctuations in credit impairment losses may affect current profits.
(2) Currently, the company's inventory turnover is within the historical range, and the minimum number of new purchases of shingles is expected to be 3.44 billion yuan in 2024.
What are the business advantages and “second curve” of Zhifei Biotech?
(1) The company has strong and leading grassroots channels, with 3,990 sales staff at the end of 2023, far surpassing peers in the vaccine industry, and has successively been recognized by MSD and GSK to obtain domestic agency rights for its major products. At the same time, the company adheres to the “technology & market” two-wheel drive model. In 2023, the company spent 1.35 billion yuan on R&D, which is significantly higher than its peers.
(2) The company's revenue increased 2% year-on-year in the first quarter of 2024. We think it may indicate that the HPV vaccine has reached maturity, but currently the vaccination rate of women of appropriate age for the HPV vaccine is 21%. There is still room for improvement, and there is potential for expansion of male indications.
(3) The company officially received the GSK shingles vaccine in 2024. We assume that with product penetration rates of 2%, 5%, and 10%, the corresponding market volumes are 32.97 billion, 82.42 billion yuan, and 164.85 billion yuan, respectively.
The minimum purchase amounts for the herpes zoster vaccine in 2024-26 were RMB 3.44 billion, RMB 6.88 billion, and RMB 10.32 billion respectively, with a total purchase amount of RMB 20.64 billion for 3 years. We believe that the potential huge market volume of the shingles vaccine and the purchase amount agreed by the company reflect the company's optimism about the shingles vaccine market.
(4) The company has a rich self-development pipeline, and various products in the fields of tuberculosis, pneumococcus, influenza, rabies, etc. have been launched or entered Phase III. In addition, the company plans to acquire incubated Chen'an Biotech to expand the field of sugar-lowering and weight-loss drugs.
How to evaluate a company's shareholder return attributes?
(1) In 2023 and the mid-term 2024, the company plans to pay a total dividend of not less than 10 yuan for 10 shares, corresponding to a dividend rate of 3.5% (calculated at the closing price of June 26, 24). Recently, the company just completed the 300 million yuan repurchase and cancellation of shares.
(2) The company's 2022 employee stock ownership plan purchased a total of 29.1 million shares of the company through self-financing and financing, accounting for about 1.82% of the company's total share capital, with a transaction amount of 2917.741 million yuan.
Profit forecasting and valuation. We expect the company's net profit to be paid in 2024-26 to be 9.22 billion yuan, 11.32 billion yuan, and 12.71 billion yuan, respectively, up 14%, 23%, and 12% year-on-year respectively. Referring to comparable companies, Wantai Biotech and Kangtai Biotech's 2024 PE was 146 times and 17 times, respectively. The company is a vaccine leader with excellent R&D, production and sales in China. We gave the company a 2024 P/E of 10 to 12 times, a reasonable value range of 38.50 to 46.20 yuan, and a market value of 922 to 110.6 billion yuan, and a “superior to the market” rating.
Risk warning. HPV vaccine revenue declined, shingles vaccine doses fell short of expectations, and independent product development failed or delayed.