Key takeaway

    The company released its 2025 annual report and 1Q26 results. Sales revenue remained steady in 2025, with new products such as the human diploid rabies vaccine and varicella vaccine continuing to scale up, and multiple vaccine products receiving marketing approval. In 1Q26, profit growth exceeded expectations, driven by reduced R&D expenses and asset impairment losses. The company has a rich R&D pipeline, with multiple products in Phase III clinical trials or under marketing application review. It is also building a pipeline of globally innovative vaccines, such as a Klebsiella pneumoniae vaccine, which is expected to fill gaps in relevant fields. Further progress is anticipated. In 2025, the company's overseas sales revenue achieved substantial growth, and overseas product registration work progressed steadily. This is expected to drive further performance growth and support the company's long-term development.

    Event

    The company released its 2025 annual report, with performance meeting expectations.

    On April 22, the company released its 2025 annual report, reporting: 1) operating revenue of RMB2.673bn, a YoY increase of 0.81%; 2) net profit attributable to shareholders of the parent company of RMB70mn, a YoY decrease of 65.12%; 3) adjusted net profit attributable to shareholders of the parent company of RMB73mn, a YoY decrease of 70.23%; 4) basic earnings per share of RMB0.06. Results were in line with expectations.

    The company's profit distribution proposal: a cash dividend of RMB0.35 (tax included) for every 10 shares, with no bonus shares (tax included), totaling a cash dividend of RMB39mn.

    1Q26 financial results exceed previous forecasts.

    On April 22, the company released its 1Q26 report, reporting: 1) operating revenue of RMB631mn, a YoY decrease of 2.18%; 2) net profit attributable to shareholders of the parent company of RMB33mn, a YoY increase of 48.61%; 3) adjusted net profit attributable to shareholders of the parent company of RMB21mn, a YoY increase of 25.35%; 4) basic earnings per share of RMB0.03. The results exceeded previous expectations.

    Quick Take

    Revenue remained steady, while lower R&D expenses and reduced inventory write-downs in 1Q26 drove profit growth

    In 4Q25, the company's operating revenue was 610 million yuan, down 3.77% YoY; net profit attributable to shareholders of the parent company was 21 million yuan, up 114.17% YoY; and adjusted net profit attributable to shareholders of the parent company was 45 million yuan, up 178.69% YoY. In 2025, the company's overall revenue remained steady. Sales of products such as the human diploid cell rabies vaccine and varicella vaccine grew YoY, contributing incremental performance. Sales of the DPT-Hib quadrivalent vaccine declined YoY due to adjustments in the DPT immunization schedule, offsetting the aforementioned incremental performance. The significant decline on the profit side was mainly due to: 1) a YoY increase in the revenue share of certain lowermargin products and export products, leading to a YoY decline in gross margin; 2) other income fell from 99 million yuan to 40 million yuan, primarily due to a reduction in government grants. In 1Q26, the company's revenue declined slightly YoY, mainly due to a YoY decrease in sales of the quadrivalent vaccine. Profit achieved above-expectation growth, primarily due to: 1) a significant YoY decline in R&D expenses resulting from changes in the timing of R&D capitalization; 2) a YoY decrease in inventory write-down provisions.

    Dual-engine strategy of domestic and overseas markets, steadily advancing new product market access and overseas expansion. Facing multiple challenges, including the impact of adjustments to the DPT immunization schedule on the quadrivalent vaccine, intensifying industry competition, and changes in end-user vaccination demand, the company implemented a dual-engine strategy of stabilizing the domestic market while expanding overseas. In the domestic market, the company steadily advanced new product market access and coverage. Sales and market access for the human diploid cell rabies vaccine and varicella vaccine continued to progress. The Sabin strain inactivated poliovirus vaccine (Vero cells) was approved in September 2025 and has completed market access in five provinces, autonomous regions, and municipalities. In the overseas market, the company's overseas business revenue in 2025 was 99.7977 million yuan, up 760.51% YoY. Among this, overseas vaccine product revenue was 98.8353 million yuan, up 859.40% YoY, becoming a significant incremental contributor on the revenue side. The company has reached cooperation agreements with more than 20 countries overseas on the registration, promotion, commercial sales, and technology transfer of products such as PCV13, PPSV23, varicella vaccine, and the quadrivalent vaccine in overseas markets. Overseas registration work is progressing steadily.

    Sustained increase in R&D investment drives efficient advancement of the pipeline. In 2025, the company's R&D investment reached RMB633mn, up 11.25% year on year. Cumulative R&D investment over the past three years totaled RMB1.745bn, accounting for 19.82% of cumulative operating revenue over the same period. Sustained increase in R&D investment has facilitated the efficient advancement of the company's pipeline. In 2025, three products were approved for marketing: the Sabin strain inactivated polio vaccine, the quadrivalent influenza split vaccine (for ages 3 years and above), and the adsorbed tetanus vaccine. The trivalent influenza split vaccine (for ages 3 years and above) is under application for marketing approval. The DTP-Hib-IPV pentavalent vaccine, the acellular pertussis (component)-based DTP combined vaccine, and the oral pentavalent rotavirus vaccine are in Phase III clinical trials. The 20-valent pneumococcal conjugate vaccine is in Phase I/II clinical trials. The bivalent/quadrivalent enterovirus inactivated vaccines and the quadrivalent influenza split vaccine (for ages 6-35 months) are in Phase I clinical trials. The company has also initiated vaccine R&D targeting Klebsiella pneumoniae, which is expected to fill a gap in the relevant field.

    Product mix change and overseas revenue growth impacted gross margin; 1Q26 R&D expenses decreased YoY.

    In 2025, the company's overall gross margin was 74.69%, down 7.31 pcts YoY, mainly due to: 1) changes in sales product mix leading to higher corresponding costs; 2) a higher share of overseas revenue, which has a relatively lower gross margin. In 2025, the company's selling expense was RMB894mn (+0.80%), with a selling expense ratio of 33.46% (roughly flat YoY); R&D expense was RMB543mn (+6.95%), with an R&D expense ratio of 20.33% (+1.17pct); administrative expense was RMB311mn (-16.32%), with an administrative expense ratio of 11.65% (- 2.38pct); financing expense was RMB43mn (+65.48%), with a financing expense ratio of 1.61% (+0.63pct). The decline in the administrative expense ratio was mainly due to a YoY decrease in expenses such as employee compensation. In 2025, the company's net operating cash flow was RMB636mn, up 5.36% YoY, remaining generally stable; asset impairment was RMB134mn, down 42.19% YoY, mainly due to a YoY decrease in inventory impairment provisions.

    In 1Q26, the company's overall gross margin was 71.10%, down 2.36pct YoY, mainly due to changes in product sales mix and an increase in the proportion of overseas revenue. In 1Q26, the company's selling expense was RMB231mn (+11.10%), with a selling expense ratio of 36.62% (+4.38pct); R&D expense was RMB84mn ( -30.13%), with an R&D expense ratio of 13.35% (-5.34pct); administrative expense was RMB72mn (-14.10%), with an administrative expense ratio of 11.35% (-1.58pct); financing expense was RMB23mn (+226.05%), with a financing expense ratio of 3.63% (+2.54pct). The YoY decline in R&D expense was mainly due to changes in the R&D capitalization timing and a reduction in R&D investment. In 1Q26, net operating cash flow was -RMB99mn, down 114.40% YoY, mainly due to reduced collections and increased tax payments.

    2026 Outlook: Expecting new product ramp-up and positive pipeline progress, with overseas business contributing incremental revenue

    The company is a leading enterprise in the domestic vaccine industry with a rich product portfolio. Sales revenue remained stable in 2025. New products such as the human diploid cell rabies vaccine and varicella vaccine continued to ramp up. The Sabin strain inactivated polio vaccine, quadrivalent influenza split vaccine (for ages 3 and above), and adsorbed tetanus vaccine were approved for marketing and are expected to contribute incremental revenue going forward. The company has a rich R&D pipeline, with multiple products in Phase III clinical trials or under application for marketing approval, providing ample momentum for future growth. The company has laid out pipelines for global innovative vaccines such as the Klebsiella pneumoniae vaccine, which is expected to fill gaps in relevant fields, and further progress is anticipated. The company continues to advance its globalization strategy. Overseas sales revenue achieved substantial growth in 2025, and overseas product registration work is progressing steadily. This is expected to bring further revenue growth and support the company's long-term development.

    Earnings forecast and investment rating

    We estimate the company's revenue for 2026-2028 to be RMB2.713bn, RMB2.875bn and RMB3.140bn, representing YoY growth of 1.5%, 6.0% and 9.2%, respectively; net profit attributable to shareholders of the parent company to be RMB124mn, RMB263mn and RMB423mn, representing YoY growth of 76.6%, 111.9% and 60.7%, implying EPS of RMB0.11/share, RMB0.24/share and RMB0.38/share, corresponding to P/E multiples of 127.4X, 60.1X and 37.4X, respectively. Taking into account the value of the company's R&D pipeline and its international business prospects, we maintain a Buy rating.

    Risks:

    1. Risk of loss from the cooperation project: The investment decision for this cooperation project is based on the company's strategic development needs and current judgment of the industry market outlook. Should factors such as changes in the market environment, adjustments to industry policies, or force majeure arise, there is a risk that the expected benefits may not be realized and may even lead to losses.

    2. Risk of product price fluctuations: The prices of already-launched products may fluctuate. If prices drop significantly, it will affect the company's revenue and profit forecasts, thereby impacting its valuation.

    3. Product safety risk: Vaccines, due to their unique biological characteristics, carry certain safety risks. If a vaccine safety incident occurs, it would not only adversely affect the company's operations and production but could also cause volatility in the vaccine industry.

    4. Risk of industry policy changes: The vaccine industry is subject to a high degree of administ rative oversight, with stringent regulation covering all stages from R&D, production, and sales to distribution. In recent years, the state has continuously strengthened its oversight of the vaccine industry, imposing higher requirements on vaccine companies. Amid the increasingly stringent regulatory environment, the company must adjust its business strategies in a timely manner to adapt to changes in industry policies and regulatory requirements, which may have a certain impact on its performance.