Has rich experience in mergers and acquisitions, excellent profitability, and is in the first tier of the industry

Since its listing, the company has developed and grown through epitaxial mergers and acquisitions. It has a total of 5 blood brand licenses and rich experience in mergers and acquisitions integration. In 2023, 44 pulping stations and 1,500-ton pulping capacity are all in the first tier of the industry. The company's revenue scale for self-produced blood products increased from 2.585 billion yuan in 2019 to 4.317 billion yuan in 2023, with a CAGR of 13.68%, with albumin, hydroxypropyl and other blood products accounting for 33.1%, 41.8% and 25.0% respectively. Among factor products, fibrin and eight factors lead the market share and have an exclusive product called fibrin adhesives. The balanced product structure and excellent sales capacity make the company's gross margin level of self-produced blood products close to 60%, and its profitability is at the forefront of the industry. After 2021, the agency albumin business contributed a large increase in revenue, and the agency business achieved revenue of 3.504 billion in 2023. The agency business was renewed with Kirriff for another ten years, and certainty and continuity were guaranteed.

There is a clear trend of state-owned holdings in the blood products industry. Industry concentration will accelerate to increase China's pulp collection by more than 12,000 tons in 2023. As the 14th Five-Year Plan pulping stations continue to be mined and the public's awareness of pulp donation increases, the supply-side growth rate will increase. The overall demand side of blood products continues to grow steadily. Some products, such as Jingacrylic, are in short supply, and the price system is relatively stable. Due to supply-side limitations, the two regional alliance collections of blood products declined moderately. With good supply-side growth and continued improvement on the demand side, the corporate performance side is expected to enter a cashout period. In recent years, state-owned enterprises have successively controlled blood products companies. State-owned enterprises and listed blood products companies with a central enterprise background have stronger financial strength and plasma development capabilities, and industry concentration is expected to increase at an accelerated pace.

Haier Group is officially controlled. Shanghai Race is expected to enter a new stage of development. Haier and Kirriff officially completed the share transaction in June 2024. Haier Group became the actual controller of the company, and the situation where Shanghai Race had no actual controller for a long time was reversed. Haier Group has three major segments: smart housing, health, and industrial Internet. Among them, there are 3 listed companies in the Big Health sector, namely Haier Biotech, Yingkang Life, and Shanghai Laishi. Haier Biotech has comprehensive solutions for smart blood use. Yingkang Life is committed to building a healthy ecosystem, and they all have good business synergy with Shanghai Laishi Blood Products. The company currently has 44 pulp stations, including 41 pulp stations. 1 newly built and 2 purchased pulp stations are expected to be mined one after another this year. Haier's holding will help develop the company's new pulp station. The 15th phase is expected to see Haier Group's enabling effect on the Shanghai Rice Pulp Station show, and the company's pulp harvesting side can be expected to grow steadily over the long term. We expect the company to achieve net profit of 2.294/2.649/3.085 billion yuan in 2024-2026, with corresponding EPS of 0.35/0.40/0.46 yuan, respectively. The current stock price corresponding to PE is 22.5/19.4/16.7 times, respectively. We maintain the recommendation and give it a “buy” rating.

Risk warning:

The amount of pulp collected falls short of the expected risk; the risk of product sales falling short of the expected risk; the launch of a new product falls short of the expected risk.