The company published the first quarter report of 2023. The first quarter achieved operating income of 2.45 billion yuan, or -4.4% year on year; net profit of 120 million yuan to the mother was achieved, -13.4% year on year.
Demand for raw grain is weak, and the company's sales pace has slowed down. Affected by weak demand for raw grain in the industry, the company sold 212,200 tons of raw grain in Q1, a decrease of 22% over the previous year. Among them, large wheat/rice sold 104/36,000 tons respectively, down 16%/51.6% from the previous year. Seed sales were 46,600 tons, a year-on-year decrease of 8%, of which 19,000 tons of wheat were sold, a decrease of 31.1% over the previous year; sales of rice seeds were 27,400 tons, an increase of 20.3% over the previous year. Overall, sales on the grain side are under slight pressure, and demand is expected to recover in the future. At the end of the first quarter, the company still had stocks of 32.38 and 428,300 tons of wheat and rice, respectively, +56% and -15.2% compared to the same period last year. The inventory was relatively strong, waiting to contribute profits in the future.
Food prices fell month-on-month, and other earnings rose year-on-year. In the first quarter, the industry's grain price performance was relatively weak. The average spot price of wheat in Jiangsu was 3158.5 yuan/ton, down 1.7% from the previous month; the average spot price of Japonica rice was 2,834 yuan/ton, down 1.4% from the previous month. Affected by the weakening of food prices, the company's profitability declined slightly. The gross profit margin for the first quarter was 12.77%, down 1.23pct from the previous year; the net interest rate was 5.02%, down 1pct from the previous year. Other revenue for the first quarter was 32.72 million, an increase of 58.9% over the previous year. Judging from the 2022 annual report, most of the company's other revenue was government subsidies. On the one hand, the scale of the subsidy increased as the company's planting area increased, and at the same time, it was optimized as the company's planting structure was optimized. The company added soybean and corn belts last year in line with planting promotion subsidies.
The company's net profit for 2023-2025 is expected to be 964, 10.77, and 1,146 million yuan respectively, up 16.7%, 11.8% and 6.4% year-on-year. According to the previous valuation level, 21xPE for 23 was given, with a target price of 1,470 yuan. The company's performance increased steadily, area expansion and food price elasticity continued to be realized. The development prospects of leading agricultural reclamation leaders are promising, and the “buy” rating will be maintained.
Risk warning
Agricultural product price fluctuation risks, policy risks, industry competition and product risks, internal related transaction risks, etc.