Report highlights
Description of the event
Agricultural development seed industry tracking report.
Incident comments
In the future, the company will strengthen the construction of scientific research platforms and enhance its core competitiveness in the seed industry. At this stage, China's seed industry has overcapacity, and the phenomenon of homogenization between products is serious, and in the context of the separation of seed businesses and enterprises, seed companies' R&D capabilities are particularly important. In the future, the agricultural development seed industry will focus on building scientific research platforms at the level of listed companies, obtain advanced scientific and technological resources through cooperation with external forces (domestic+international), and graft them to subordinate seed companies at the right time to give full play to their respective advantages and transform them into commercialized varieties. At present, the company has signed a strategic cooperation agreement with Beijing Boao Jingdian Biotechnology Co., Ltd. to cooperate in building molecular breeding laboratories, bioinformatics big data analysis platforms, and planning and implementing commercial transformation of products to increase research and release of genetically-modified technology; under the general trend of China's genetically modified policy liberalization in the future (it is expected that the corn genetically modified market will be first liberalized in the later stages and then expanded to other general food crops), which will help the company seize market opportunities.
The company's strategic idea for building an integrated agricultural platform for central enterprises is clear: with the seed sector as the core, the first step is to form a broad pattern of seeds+pesticides through epitaxial expansion, and the second step is to strengthen it through internal integration, outreach cooperation, and building a “agricultural material+farm+storage” service platform connection model. The Zhoukou Agricultural Service Company, which was previously piloted on a farm in Huangfan District, is progressing smoothly. Later, in this pilot area, the company will continue to integrate supporting resources such as storage and logistics on the one hand, and improve the terminal agricultural product processing market on the other. It is estimated that the service company will drive a total of 4.6 billion yuan in agricultural sales revenue from farms and surrounding areas in Huangfan District; while in the central region, there are 5.26 million acres of farmland, which can drive about 105 million acres of rural arable land, with a revenue margin of 24.2 billion yuan. According to a 10% net interest rate, they can contribute about 2.4 billion yuan in net profit every year. They are optimistic about the future construction of agricultural integrated platforms and agricultural service systems.
The company will benefit from group-level agricultural asset consolidation. In 2013, Nongfa Group successfully injected Splendid Huanong into the agricultural development seed industry to achieve the concentration of seed industry enterprises, while the group level still has 4.3 million acres of domestic land and about 700,000 mu of cultivated land (including Mudanjiang Military Racecourse in the northeast region, where the land is fertile and has excellent natural conditions, suitable for the cultivation of various crops. Currently, it has 90,000 mu of arable land and 110,000 mu of woodland) and huge overseas agricultural ranches. Nongfa Seed Industry is the only platform for listing the planting industry under the Group. In the context of state-owned enterprise reform, there are great expectations for the injection of land assets.
The company's EPS for 2016 and 17 is expected to be 0.14 and 0.17 yuan respectively, giving it a “buy” rating.
Risk warning: 1. The construction of the service system fell short of expectations;
2. The agricultural reclamation reform process fell short of expectations.