Summary:

As a large-scale integrated agricultural central enterprise, what the company has received market attention is undoubtedly the central enterprise reform and related concepts such as land transfer. However, in the end, the purpose of reform or circulation is to serve the company's strategic system.

Currently, the company's “seed - agricultural materials” pattern will develop into a comprehensive service platform of “agricultural materials - farm - storage” in the future. Therefore, doing a solid job in the current business is the foundation for the company's development. The company's own varieties “Yangjiao 113”, “Yangjiao 805,” and “Yangmai 16” were recognized by the market during the low period of the industry due to their high quality characteristics. Hongze Lake Farm plans to expand the planting area of Yangjia 805 to 8,000-10,000 mu in 2017, and the planting area of “Yangmai 16” in the Jianghuai region will also be further increased.

As the corn industry stabilizes further, demand from downstream feed companies will rise further, and the transmission effect will further affect the demand for vegetable meal and wheat. April-July is also the storage period for downstream companies, and the tight market will have a certain impact on the company's performance.

Under the pressure of domestic environmental protection, the overall domestic fertilizer sales environment is not very good, but the company achieved a net profit of 10 million in 2016. In 2017, the country adjusted exports in response to the characteristics of the fertilizer industry and provided tax exemptions and tax reduction support for various fertilizer products, which also had a certain beneficial effect on the company's business.

Profit forecast: We forecast the company's 2016-2018 EPS to be 0.06, 0.48, and 1.09 yuan respectively, giving the company an “increase in holdings” rating.

Risk warning: 1) the risk of market changes; 2) regulatory risks; 3) the risk of industrial policy changes.