2021 results in line with our expectations
　　CanSino announced 2021 results: Revenue totaled Rmb4.30bn, mainly derived from COVID-19 vaccine sales (brand name: Convidecia).Attributable net profit was Rmb1.914bn, with EPS of Rmb7.74. The results were in line with our expectations. The company plans to pay a dividend of Rmb0.8 per share (including tax).
　　Trends to watch
　　Rapid growth of COVID-19 vaccine sales in 2021 helped the company become profitable for the first time. Benefitting from the listing of　Convidecia in many countries, revenue of CanSino’s vaccine business totaled Rmb4.30bn in 2021, including Rmb1.24bn from China and Rmb3.06bn from overseas. In February 2022, Convidecia was approved by the Joint Prevention and Control Mechanism of the State Council of China as a sequential heterologous booster vaccine. Convidecia was also approved as a heterologous booster in Argentina, Malaysia and Indonesia.In March 2022, the World Health Organization (WHO) announced that the company's COVID-19 vaccine is undergoing Emergency Use Listing (EUL)/Prequalification (PQ) evaluation process, and reached the stage of Dossier Accepted for Review. Besides the COVID-19 vaccine, the company’s ACYW135 meningococcal conjugate vaccine (CRM197, brand name: Menhycia) was granted approval by NMPA on December 29, 2021.Menhycia was the only tetravalent meningococcal conjugate vaccine in China. Considering the vaccine batch issuance and bidding, we expect Menhycia to contribute revenue in 2H22.
　　Actively build sales and R&D teams and transform platform into an　innovative vaccine enterprise. The company's sales expense was Rmb106mn in 2021 (+538.9% YoY). At present, the company has a commercial team of about 400 people, and has formed a sales network covering 30 provinces, cities and autonomous regions in China, actively preparing for the sales of vaccine products. The company added investment in R&D and expanded the pipeline portfolio. In 2021, the R&D expense was Rmb879mn (+105.1% YoY). As of December 31, 2021, the company's R&D team had reached 309 people (+41% YoY). In addition, the company has also started vaccine research and development based on mRNA platform.
　　Innovative vaccines continue to be ramped up and watch for progress in its clinical pipeline. 13-valent pneumococcal conjugate　vaccine (PCV13i) entered clinical Phase III in April 2021 and is expected to complete Phase III clinical trials in 2022 by the company. Phase I clinical trials of the DTcP booster and infant vaccine have been completed, and the company expects to start Phase III clinical trials of those two vaccines in 2022. In addition, the company is promoting the clinical progress of inhaled adenovirus vectored COVID-19 vaccine, whose published study shows robust mucosal, humoral and cellular responses, as well as good safety profiles. The company is carrying out late-stage clinical trials of inhaled COVID-19 vaccine.
　　Financials and valuation
　　Considering the fast-changing competitive landscape for COVID-19 vaccines, we conservatively predict the future sales of COVID-19 vaccines in the model, thus we lower 2022 and 2023 EPS forecasts 97.1%/95.2% to Rmb0.47 and Rmb0.98. For A-shares, considering earnings forecast revisions and its well progress in clinical pipeline, we maintain OUTPERFORM but lower our TP by 10.5% to Rmb336.01, offering 44.8% upside. For H-shares, we maintain OUTPERFORM but lower our TP by 5.8% to HK$180.51, offering 43.4% upside.
　　Risks
　　Risk of price reduction of COVID-19 vaccine; weaker-than-expected sales, clinical trials disappoint.