Focus on the main industry, expand and strengthen the seed industry, and meet the development cycle of the seed industry.
Over the past 14 years, the company has actively adjusted its industrial structure, stopped deep loss-making industries such as oil and fat, and focused on developing agricultural industries with seeds as the core. Seed business accounted for 67% of revenue in 2015. We believe that after the adjustment from 2013 to 2015, the seed industry has begun to recover and is expected to open a new business cycle, especially under the background of the landing of the new "seed Law", the implementation of the green channel policy and the acceleration of industry integration. Strong companies in the integrated seed industry are facing good opportunities for development.
The accelerated launch of new varieties is expected to improve the performance of the seed business.
Dunhuang Pioneer is the core asset of the company's seed industry and the main source of the company's profits. Xianyu 335, its main variety, is now in the mature stage, but it still has obvious advantages. In addition, Dunhuang Pioneer has launched regional dominant varieties such as Xianyu 508 and Xianyu 402, and has newly approved reserve varieties such as Xianyu 1111, 1225 and 1219. The continuous introduction of new varieties is expected to enable Dunhuang Pioneer to maintain a strong regional position. Dunhuang Pioneer performance is expected to stabilize and pick up. As for the parent company, it has actively promoted the strategy of focusing on the seed industry and increased the research and development of the seed industry. at present, it has initially established a research and development system led by the company's research institute. Jixiang No. 1, Dongfanghong No. 1, Feitian 358, Dunyu 328, Dunyu 12, Dunyu 13, Dunyu 15, long 213 and other potential corn varieties have been developed. Moreover, with the landing of Green Channel, the introduction of new varieties has been accelerated, and 45 new maize hybrid varieties have entered the experimental examination and approval process in 2016. We believe that the core of the seed industry competition lies in the continuous introduction of high-quality new varieties, with the continuous introduction of new products, the company's seed business profits are expected to return to growth.
Fixed increase helps the development of the company, and mergers and acquisitions open up the room for growth.
In 2015, the company completed a non-public offering to raise 465 million yuan, with a price increase of 6 yuan per share, which is used to promote seed research and development and marketing construction, which is conducive to the development of the company's seed business and reduce the company's financial expenses. In October 2016, the company plans to cooperate with Anju assets to set up an agricultural industry M & A fund with a tentative size of 1.503 billion yuan, and the company will contribute no more than 200 million yuan as an inferior investment. The agricultural fund will become the main body of the company's future mergers and acquisitions. We believe that under the background of the acceleration of industry integration, M & An is the inevitable way for seed companies to become bigger and stronger. In the future, the company is expected to find high-quality agricultural industrial projects through the agricultural fund, and inject it into the listed company after maturity, so as to realize the great-leap-forward development of the company.
Food processing to promote product structure upgrading, cotton industry to achieve efficiency optimization, superimposed cotton prices rise, performance is expected to improve.
In food processing, the company has stopped its deeply lossmaking oil processing business, is now focusing on the production and sales of tomato products and dehydrated vegetables, and is actively promoting the upgrading of product structure and opening up overseas markets to improve the profit level of the food processing business. in the first half of 2016, the gross profit margin of the company's food processing business reached 17.01%, an increase of 3 percentage points over 2015. From the point of view of the cotton industry, affected by the drop in cotton prices, the company has suspended the acquisition and processing of cotton since 2015, mainly for the storage and management of national cotton reserves. In 2016, cotton prices bottomed out and rebounded, rising from less than 12000 yuan / ton in the first half of the year to nearly 16000 yuan / ton at present. The rebound in cotton prices in 2016 is expected to lead to a rebound in the profits of cotton acquisition and processing business. Overall, the company's food processing plate and cotton plate are undergoing positive changes, the future performance is expected to improve.
Give a rating of "overweight". The company's strategy to expand and strengthen the seed industry has been steadily advanced, R & D strength and variety development capabilities have been greatly improved, and it is expected to share the business cycle dividend of the seed industry. in addition, the company has a small market capitalization and strong expectations of mergers and acquisitions relying on industrial funds. Excluding the investment income and mergers and acquisitions from the sale of shares in Donghai Securities, the company is expected to earn-0.22,0.02 and 0.04 yuan per share from 2016 to 2018.
Risk tips: 1. Risk of seed production; 2. The landing of the industrial fund is not as expected.