“Pesticide formulation+specialty fresh food” two-wheel drive, complementary and collaborative development of industries. The company is mainly engaged in R&D, production and sales of pesticide formulations and plant nutrition products, and provides farmers with corresponding plant protection technology services. It is a leading pesticide formulation enterprise in China. The company began laying out the field of fresh consumption with modern characteristics in 2018, actively exploring the second growth curve of transformation and upgrading. Going deep into the “modern specialty fresh consumption sector” and implementing the “single specialty crop industry chain” strategy, it has now deployed the Yunnan Plateau's substrate blueberries, bird's nest fruit, Sanya dragon fruit, etc.

Per capita consumption of fresh fruit continues to grow, and consumption of fine fruit is becoming a trend. Domestic fresh fruit showed four major trends of incrementalization, symbolization, retailing and nationalization. Among them, the popularity of blueberries has risen rapidly. There are three main reasons: ① Blueberries have been recognized by consumers in terms of appearance, efficacy, and nutritional value; ② While they have high nutritional value, blueberries can protect eyesight and fight aging; ③ Blueberries have convenient purchasing channels, online and offline parallel, and are highly timely. Packaged sales can effectively meet the consumption needs of different volumes.

China is already a major producer of blueberries, and Yunnan has become synonymous with high-quality fresh blueberries. China's total blueberry production in 2021 was about 474,000 tons, +66.3% over the same period last year, which was significantly higher than the growth rate of global blueberry production, making it the world's largest producer of blueberries. In 2018-2022, China's blueberry imports increased from 15,000 tons to 43,000 tons, with a CAGR of 29.2%. The rapid growth in imported fresh fruit reflects the consumption potential of China's blueberry fruit market. Growing conditions for blueberries are strict, the introduction of varieties is highly dependent on overseas, and prices fluctuate significantly seasonally throughout the year, showing the pattern of highest prices in winter and spring and lower in summer and autumn. There is a huge difference in price between different qualities. However, with its unique location advantage, Yunnan not only enjoys the high quality advantages of blueberries, but also has the price advantage of being precocious.

Why is the blueberry industry “reinventing” Knopson? The company set up Guangzhu Agricultural Group to develop fresh fruit business using the “1+N” model. Blueberries became the core part of the company's fresh fruit landscape. The company has set up four flagship companies in Yunnan according to the blueberry-growing regions, managing the four major production areas of Honghe, Wenshan, Pu'er, and Baoshan in Yunnan. Currently, it includes the construction of a total of 34 blueberry planting bases. Under the unified land transfer by the local government, the company has achieved a strategic contract area of about 30,000 mu. Based on the calculation of a yield of 1.5 tons, 30,000 mu of planting area entering production peak will contribute about 36,000 tons of blueberries every year, and the company is expected to become the leader in fresh blueberries in China.

Costs are expected to gradually dilute with rising production per mu, prompting the early consolidation of the logic of a sharp rise in volume and price. The 2023Q1 company sells about 1,570 tons of blueberries, with an average sales price of about 85 yuan/kg. Production costs are currently about 32-35 yuan/kg. Calculations suggest that the average profit per ton in the first quarter exceeded 50,000 yuan. In 2023, the company actually put into operation about 6,000 acres, and plans to plant more than 20,000 acres (including the area already put into production). We expect the company's blueberry production to be 6,000 tons in 2023 and more than 20,000 tons in 2024. In the future, as blueberries reach a peak in production, there is room for further downward dilution of costs. In addition, the company promotes early use of its own water and fertilizer formulations and technical methods such as pruning, etc., to advance the ripe blueberry production season by 1-2 months without affecting the quality of blueberries. Early bird promotion technology will soon be applied to the promotion of a wide range of blueberry varieties to avoid the risk of a seasonal decline in blueberry prices beginning in May.

Investment advice: We expect the company's net profit from 2023 to 2025 to be 4.50, 800, and 1,096 billion yuan respectively, EPS of 0.45, 0.80, and 1.10 yuan respectively, and corresponding PE 18, 10, and 7 times respectively.

As a “small but beautiful” boutique fruit, blueberries have significant advantages in growing income compared to popular fruits. The company created a second growth curve by expanding the blueberry industry, and is expected to obtain rapid growth in performance, coverage for the first time, and a “recommended” rating.

Risk warning: Production capacity investment falls short of expectations, prices of agricultural products fluctuate greatly, taking into account the risk of impairment losses.