1-3Q23/3Q23 deducts the net profit of non-return from 9.3% of the same period last year, which is in line with our expectation that the company will announce 1-3Q23 results: 1-3Q23 income of-4.3% to 8.62 billion yuan, and net profit of return / deduction of non-return, respectively, from-12.1% to 9.0% to 5340 million yuan, respectively Among them, the 3Q23 income is from + 16.5% to 3.33 billion yuan compared with the same period last year, and the net profit from returning to the mother / deducting the non-return to the mother is respectively-2.6% from 9.3% to 2.5 billion yuan compared with the same period last year. Deducting non-post-sales results are in line with our expectations, the company slowed down the pace of 2Q23 wheat sales to 3Q23 out of the warehouse, superimposed 3Q23 wheat prices rebounded month-on-month, jointly led to improve the performance of the quarter.
Trend of development
Wheat prices and sales of the main business pick up, helping to improve the operation of 3Q23. 1) the main business of wheat is paid by quantity.
On the price side, the continuous rainy weather in Henan in May led to a bottom rebound in domestic wheat prices. according to Huiyi, the average price of 3Q23 wheat was 2902 yuan / ton, quarter-on-quarter + 3.5%, year-on-year-6.1%, close to the 22-year level; on the sales side, the company 2Q23 slowed down the pace of sales, 3Q23 wheat prices picked up and accelerated out of the warehouse, and the stock removal volume of 3Q23 self-produced wheat was + 36% compared with the same period last year. 2) the volume of sideline sales such as wheat seed and edible oil. Due to the tight supply and demand of the wheat seed industry affected by rainfall in Henan, the company increased wheat seed processing and 3Q23 sales + 80% compared with the same period last year, which also contributed to the business repair in the current quarter; edible oil price 3Q23 rebounded from the bottom, although it was less than the same period last year, but the company accelerated the pace of sales. 3Q23 sales were + 167% year-on-year, and we think we can also achieve volume premium.
Profitability is under year-on-year pressure from a high base, but the recovery in wheat and cooking oil prices has led to an improvement in profit margins compared with the previous year. 1) Gross profit margin: 3Q23's gross profit margin ranges from-2.5ppt to 13.6% compared with the same period last year, which we believe is mainly due to the high base caused by high grain prices in the same period last year; benefiting from the bottom rebound in 3Q23 wheat and edible oil prices, the company's gross profit margin is + 2.7ppt. 2) expense rate: 3Q23 sales / management (including R & D) / financial expense rates are all improved, from-0.2/-0.3/-0.6ppt to 1.5% 0.2/-0.3/-0.6ppt 4.9% and 1.7% respectively. We think that some of them benefit from the dilution caused by the increase in revenue after the adjustment of sales pace. Under the combined impact, the company's profitability is under year-on-year pressure but rebounded month-on-month, 3Q23 homing net interest rate year-on-year-1.5ppt to 7.5%, month-on-month + 1.8ppt.
The main planting industry moves forward steadily, and the whole industry chain broadens the space for development. 1) main planting industry: we judge that the prosperity of the main planting industry is expected to pick up in 2024. On the one hand, under the background of tight balance between supply and demand, domestic grain prices may remain high; both pesticide and fertilizer prices will fall this year compared with the same period last year, and we expect that the improvement in planting costs will be better reflected in next year's sales. 2) extension of industrial chain: it is optimistic that the extension of the whole industrial chain of the company will broaden the space for long-term development. Specifically, we believe that the seed industry is expected to integrate resources with the help of Jiangsu seed industry, with the dual development of endogenesis and extension; edible oil will compete for high-quality assets this year, and is expected to gradually integrate to enhance competitiveness; malt will continue to extend the high-end malt industry chain; the rice industry will promote high-standard production capacity reconstruction and expansion projects; in addition, the company has increased investment of 200 million yuan in Suken agricultural service in September, and the social service business is also expected to be further improved.
Profit forecast and valuation
The current share price corresponds to 2023 Universe, 24 years, 16, 14, and 14, P, and E, respectively. We maintain the 24-year home net profit forecast of 850 million yuan and the target price of 14.5 yuan unchanged, corresponding to the 24-year 24-year 24-year net profit of 2023 Universe, which is 20 times as much as Pmax and 46% space, maintaining an industry rating that outperforms.
Risk
Natural disasters; food price fluctuation; product quality risk; land transfer, government subsidy policy change.