The net profit of 2023H1 was 39.42 million yuan, which was + 29.3% compared with the same period last year.
On August 25, 2023, the company issued a semi-annual report: 2023H1 achieved total operating revenue of 1.08 billion yuan, year-on-year + 11.9%, parent net profit of 39.42 million yuan, year-on-year + 29.3%; in a single quarter, 2023Q2 achieved total revenue of 460 million yuan, year-on-year-11.9%, and return-home net profit of 8.1 million yuan,-19.5%. The decline in homing net profit is mainly due to the normal fluctuation of off-season sales. We maintain the profit forecast and expect the company's EPS to be 0.29,0.40,0.54 yuan respectively from 2023 to 2025. With reference to the comparable company's average value of 52x PE in 2023 (Wind consensus expectation), we give the company a 23-year 52x valuation with a target price of 15.08yuan and maintain a "buy" rating.
The gross profit margin of rice seeds improved, the sales of corn / cotton seeds and lint cotton increased steadily in the first half of the year, and the company's overall income grew steadily and profitability improved significantly in the first half of the year. 1) Hybrid corn and cotton seed varieties performed excellently, benefiting from increased marketing efforts and increased market share, of which corn and cotton seed income was 130.07 million yuan respectively, compared with the same period last year. 54.6% 2) lint business expansion superimposed higher market prices, driving the performance repair of relevant sectors, the company's lint income of 220 million yuan, year-on-year + 757.4%, gross profit margin of 6.0% 3) Rice seed income is 335 million yuan,-14.7% compared with the same period last year, mainly due to the fact that the rice seed industry is still in the de-inventory stage and the company sold a high base last year. The company has obvious advantages in rice varieties, with a gross profit margin of 39.96%, which is + 3.59pcts compared with the same period last year.
Benefit from stronger rice prices and commercialization of genetically modified genes in the wind
The company insists on scientific research, adding 9 varieties of hybrid rice and wheat in provincial examination in the first half of the year. Looking ahead, we believe that the company is expected to benefit from two major trends: 1) Rice prices are stronger in the first half of the year, mainly due to the reduction of rice production and the easing of oversupply pressure in 2022. Since July, due to the export ban issued by India and the impact of typhoons on domestic production, grain prices have been emotionally supported again, superimposed by the policy background of the increase in minimum purchase price and food subsidies, the income from growing rice is expected to be guaranteed, and upstream rice seed sales may benefit. 2) the No. 1 document of the Central Committee this year pointed out that the pace of industrialization of GM breeding should be accelerated and the scope of pilot projects should be expanded in an orderly manner. Considering that the company has already reserved resources related to biological breeding, it is expected to benefit from the domestic commercialization of GMOs.
Target price 15.08 yuan, maintain the "buy" rating
The company is the leader of rice seeds in China, through epitaxial mergers and acquisitions to accelerate the expansion of corn and wheat seed business, and actively expand order agricultural business downstream, reverse promote seed sales; in the field of transgenic, the company actively cooperates with character companies to develop genetically modified corn varieties, cutting into this track from the seed sales end, there is a broad space for development in the future. We maintain the profit forecast and expect the company to make a net profit of 2.78,3.81 and 510 million yuan respectively from 2023 to 2025, with an updated target price of 15.08 yuan (the previous target price is 14.64 yuan after the increase in equity) and maintain the "buy" rating.
Risk hints: the progress of the promotion of genetically modified varieties is not as expected, the yield of genetically modified crops is not as expected, the supervision of the seed industry is not as strong as expected, there are serious natural disasters, food prices are not as expected, and so on.