The results in the third quarter were worse than expected. In the first three quarters, the operating income was 730 million yuan, up 7.67% from the same period last year; the operating profit was-64.1 million yuan, compared with 33 million yuan in the same period last year; and the net profit attributed to shareholders of listed companies was-89.67 million yuan, compared with-22.8 million yuan in the same period last year. Basic earnings per share is-0.44 yuan. The performance was worse than expected.

Huge non-recurrent losses and losses in the oil processing business have dragged down the overall performance. In the first three quarters, the company did not operate well in the futures market, resulting in an investment loss of 18.32 million yuan and a fair value change loss of 15.94 million yuan, totaling 34.26 million yuan, while the two contributed a total income of 7.9 million yuan in the same period last year. According to our analysis, the loss may be related to the decline in oil prices in the same period, and as oil prices are expected to rise later, we believe that the loss of fair price changes may be partially recovered. In addition, there was a substantial increase in revenue in the third quarter, while the profit level declined significantly (the gross profit margin was only 6.57%, down 13.35 points, and the operating margin was 10.42 million yuan, down 18.08% from the same period last year). The possible reason is that the fixed investment in oil processing projects have already started production and the gradual expansion of production and marketing scale has a positive effect on income growth. However, low oil prices and business losses have lowered the gross profit margin of the food processing business and the company's quarterly profit level, which is expected to improve next year.

Affected by the expansion of the scale of corn seed production, the prepaid account increased significantly. At the end of the third quarter, the prepaid account of the company was 311 million yuan, an increase of 49.88% over the same period last year. The increase in prepaid accounts is mainly due to the increase in the amount of seed production in the prepaid base as a result of the expansion of corn seed production. According to the company, a total of 225000 mu of corn seed production area was implemented in the first half of the year, an increase of 68600 mu over the previous year.

The rate of expenses for the three items has dropped slightly. In the first three quarters, the company's financial expenses were 44.51 million yuan, an increase of 31.31% over the same period last year; the financial expense rate was 6.09%, an increase of 1 point over the same period last year, but because the sales expense rate decreased by 1.56 points, the three expense rates decreased by 0.49 points compared with the same period last year. The increase in the rate of financial expenses may be related to the new oil processing business, in which raw material procurement takes up a large amount of funds to increase financial costs, while the low product prices lead to sales difficulties and lag in income growth, resulting in an increase in financial expenses. It is expected that the probability of oil prices rising in the later period is greater, sales may improve, and the rate of financial expenses will also fall.

Downgrade to "overweight". It is estimated that the EPS of 11 / 12 is 0.5x0.77 yuan respectively, corresponding to the PE of 38max, 25 times, the valuation is advantageous, but considering the uncertainty of oil business turnaround and floating loss recovery, the rating is temporarily downgraded to "overweight".

Risk: oil prices continue to fall, seed production is not as expected