Incidents:
The company released its 2022 interim report. It achieved revenue of 926 million yuan in the first half of the year, a decrease of 5.28% over the previous year; achieved net profit of 152 million yuan, an increase of 15.8% over the previous year; and achieved net profit of 131 million yuan after deducting non-return mother's net profit, an increase of 23.93% over the previous year.
Comment:
2022H1 revenue declined slightly, and performance continued to increase. Revenue in the first half of 2022 fell 5.28% year on year, while performance increased 15.8% year on year. The main reason for the discrepancy between the two was the increase in debt restructuring earnings confirmed by the company and the decrease in investment losses of confirmed associated companies compared to the previous year. The net return on investment increased 6.6pct to -1.21%.
Gross margin has declined, and cost control has been steady. The gross margin of the 2022H1 company decreased by 3.92 pct to 36.85% year on year, and the cost rate for the period decreased by 0.99pct to 14.32% year on year. Among them, the sales expense ratio decreased by 0.66 pct to 1.7% year on year, mainly due to the year-on-year decline in business promotion and hospitality expenses; the management expense ratio increased 0.95pct to 7.04% year on year; the R&D cost rate decreased by 1.97pct to 4.19% year on year, mainly due to the shift in key research direction from application demonstration projects to technology research projects in the grass seed industry; the financial expense ratio increased 0.69pct year on year to 1.7% year on year 1.39%, mainly due to a year-on-year decrease in financial expenses - interest income confirmed by the company's PPP program.
New breakthroughs have been made in seed industry technology, and core competitiveness has been strengthened. In 2022, through cooperation between government and enterprise, a high-quality native grass breeding base at Hossegura Ranch in the Uragai Management Area was officially completed. It mainly breeds herbs such as alfalfa, sheep grass, pyridyl grass, and marlin, providing a material foundation for the selection and improvement of new forage varieties, natural grassland improvement, artificial grassland construction, and the development and industrialization of high-quality grass products. At the same time, the “Chang'e-5” space breeding test has completed phased work, including six grass varieties, including Daqingshan Shanshang and Daqingshan thin-leaved lily. They have been studied on expansion techniques such as group cultivation and seedling raising. Callus tissue and regenerated plants have been obtained, and variant plants have been screened through indicators such as phenotypic traits and growth cycle. Mutated plants with an advantage in the flowering period have now been screened. In terms of the germplasm resource bank, the company built a 330-square-meter drying room, specimen bank, and soil bank to store 1,694 species of geographically marked native plant germplasm resources, 48,000 copies; 4,000 specimens, nearly 120,000 copies; and 1.4 million copies of soil.
Maintain the company's “buy” rating. Due to the impact of the epidemic, the company's EPS for 2022-2024 was lowered to 0.21/0.24/0.29 yuan, and the corresponding PE was 18.62/16.19/13.64, respectively.
Risk warning: Warmth and humidity in the northwest fall short of expectations; grassland carbon sinks fall short of expectations; competition in the grass seed industry intensifies
