The company is the only domestic enterprise that has been listed with “grass technology” and “seed technology”. It is also the only major listed garden enterprise that specializes in business in the northwest region. It has established the most complete domestic plant germplasm resource bank, combined with data technology to form a high technical barrier in the seed industry, and has become a leader in grassland ecological restoration and the largest supplier of natural forage in China.
The company's financial report highlights, and financial risk has been reduced to a reasonable level. The company is the only major garden enterprise whose balance ratio has continued to decline in recent years, and since 2018, the equity pledge ratio has dropped from 30% to zero. The ratio of the company's long-term debt to long-term assets quickly fell below 1 between 2015 and 2018, but by 2021 it had rebounded to around 1.2, which is relatively safe, and the recovery ratio was the largest in the same industry, indicating that the company's financial quality could recover quickly after being impacted, which is rare among major garden enterprises.
The seed industry+big data creates a core competitive barrier for companies. Relying on the advantages of germplasm resources, the company relied on the advantages of germplasm resources: 1) innovated ecological restoration models and introduced domesticated native plants for ecological treatment to form the company's core competitiveness; 2) established a complete ecological database in the northwest region, enabling digitization of biological information for every 0.5 square kilometer of plant species in China to help intelligent and accurate restoration. At present, ecological big data has been upgraded to a national strategy. As the first enterprise in the country to build an ecological big data platform, the company has broad market prospects.
Ecological benefits boost the value of the company's seed sector. Germplasm resources allow vegetation restoration in northwest China to do more with less, and a region's gross ecosystem product (GEP) mainly comes from the regulatory service value generated by vegetation, so seed sources are of great significance in improving regional GEP. The COP15 Kunming Declaration clearly proposes the inclusion of biodiversity in economic accounting, and compliance responsibilities are expected to accelerate the implementation of GEP's inclusion in local government assessments. Combined with the central government's policy statement on seed industry revitalization and seed source protection, the value of the company's seed industry sector is expected to increase.
Lay out a blue ocean of carbon sinks, with grassland carbon sinks taking the lead. The company's advantages in grassland carbon sink development are obvious: First, the company uses seed industry technology to enhance the amount of carbon sequestration in vegetation in northwest China, and has a rare large-scale grassland carbon sink development capability. Second, the company has restored a total of 30 million mu of various types of ecological areas. It has a rich business stock and is closely linked to local governments, and its potential capacity to undertake carbon sink projects is outstanding. Third, the company entered the carbon sink field ten years ago. It has a deep understanding of the carbon sink business and has accumulated a great deal of technical experience and expert resources. Finally, the company's leading ecological big data construction can provide precise guidance for carbon sink development. Investment advice: The company's seed industry technology+big data has formed a differentiated competitive advantage, formed a broad moat, and will fully enjoy the 100 billion new market dividends of ecological restoration in northwest China. Seed source protection has been elevated to a national strategy, and China's ecological compliance responsibility boosts the value of the company's seed industry. The company's financial risk is low, and as a scarce target for grassland carbon sink development, there is great potential for growth. The company's 2021-2023 EPS is expected to be 0.23, 0.28, 0.33 yuan/share, the target PE for 2021 is 32 times, and the corresponding target price is 7.41 yuan. The first coverage gave a “Highly Recommended - A” rating.
Risk warning: industry policy risks, seed business falling short of expectations, grassland carbon sink business falling short of expectations.