Report Highlights Incident Review We judge that in 2016, the agricultural seed industry's endogenous performance is expected to experience considerable growth. In 2015, there were three major subsidiaries in the agricultural and seed industry that did not complete their performance promises, namely Henan Agrochemical (the overall decline of the industry last year, expected to improve this year, to achieve a net profit of 70 million yuan), Guangxi Green (market bottlenecks in the Guangxi region appeared. This year, the company will increase market expansion outside Guangxi and is expected to achieve net profit of 15 million yuan), and Jinxiu Huanong (competition in the rice industry was intense last year. This year, the company will seek more government projects and is expected to achieve a net profit of 10 million yuan). In addition, last year, Hubei Seed's profit declined sharply from 2014 due to intense competition in the rice seed industry. This year, driven by Huanghuazhan Live Rice, its performance is expected to improve, and is expected to achieve a net profit of 8 million yuan; the performance of the Earth's seed industry is growing steadily, and it is expected to achieve a net profit of 25 million yuan this year. Overall, we expect the agricultural seed industry's endogenous performance in 2016 to be 106 million yuan, achieving an endogenous increase of about 50% compared to last year. We judge that in the context of the continuous introduction of state-owned enterprise reform policies, China Agricultural Development Group's resource integration is expected to accelerate. In 2013, the agricultural development group successfully injected Jinxiu Huanong into the agricultural development industry to achieve the concentration of seed industry enterprises, yet the group level still has 4.3 million mu of land and 700,000 mu of arable land (including the Mudanjiang Military Racecourse in the northeast region, with fertile land, excellent natural conditions, suitable for growing various crops. Currently, it has 90,000 mu of arable land and 110,000 mu of woodland) and a huge area of overseas farming and ranching. As the only planting industry listing platform under the group, the injection of land assets is an inevitable trend. Recently, state-owned enterprise reform policies have been continuously introduced, and a number of central enterprise groups have been suspended and restructured one after another. We expect that the integration of China Agricultural Development Group's resources will also accelerate. In the future, the company will strengthen the construction of scientific research platforms and enhance its core competitiveness in the field of seed industry. Although the seed enterprises under the agricultural seed industry all have certain R&D capabilities, their overall strength is not strong, and there is still quite a gap compared to the leading seed industry. In the future, the agricultural seed industry will focus on building a scientific research platform at the level of listed companies, obtain advanced scientific and technological resources through cooperation with external forces (domestic+international), obtain advanced scientific and technological resources, and transfer them to subordinate seed enterprises at an appropriate time, giving full play to their respective advantages and turning them into commercial varieties. The agricultural service system construction model is still being explored. At this stage, local seed enterprises under the company are exploring agricultural service models based on their own circumstances. The overall trend is to connect services with traditional marketing channels, sell through services, and reduce farmers' procurement costs and labor investment. The pilot project was carried out on a farm in Huangfan District. The company previously established the Zhoukou Agricultural Service Company to provide agricultural products such as seeds, pesticides, fertilizers, etc., and provide planting technical guidance. Currently, progress is going smoothly. Overall, it is still in the model exploration stage and will generate some profit, but it is difficult to achieve explosive growth in the short term. Reiterate the “buy” rating. It is estimated that the company's EPS in 2015 and 2016 will be 0.3 and 0.43 yuan respectively, giving it a “buy” rating. Risk warning: (1) corporate mergers and restructuring falls short of expectations; (2) the speed of service system construction falls short of expectations; (3) the agricultural reclamation reform process falls short of expectations