23Q3 pig prices remain in the doldrums, the company's pig farming business losses, a drag on the company's overall performance. The feed sales of 23Q3 Company has increased steadily, and the advantage of scale continues to expand. The industrialization of biological breeding has officially landed, and the company accounts for the highest proportion of characters. Transgenic trait business has entered the performance cash period, and is expected to rely on the first-mover advantage to establish long-term competitive barriers. Considering the factors such as the official landing of pig breeding, feed, biological breeding industrialization, the competitive advantage of each business of the company, and considering the depressed pig price, we maintain the forecast EPS of 0.05kg 0.43pm 0.60 yuan from 2023 to 2025. With reference to the comparable valuation level of the feed, pig farming and seed industries, the overall valuation of the company in 2024 is 20 times PE, corresponding to the target price of 9 yuan, maintaining the "buy" rating.

The aquaculture plate suffered a deep loss, dragging down the overall performance. According to the three-quarter report of 2023, 23Q3 achieved revenue of 8.26 billion yuan, down 5.0% from the same period last year, realized net profit of-130 million yuan, deducted non-return net profit of-200 million yuan, turned into losses over the same period last year, and realized operating income of 23.93 billion yuan in the first three quarters of 2023, an increase of 8.3% over the same period last year, realizing net profit of-910 million yuan and deducting non-return net profit of-950 million yuan, increasing losses over the same period last year. 23Q3 pig prices remain in the doldrums, and the company's breeding business continues to lose money, dragging down the overall performance.

The scale of feed sales has increased steadily, contributing to the company's core performance. We estimate that the company's 23Q3 feed sales are about 1.3 million tons, an increase of about 8.5% over the same period last year, a decrease of about 9% compared with 23Q2, and a net profit of about 200 million yuan. the total feed sales in the first three quarters of 2023 was 4.1 million tons, an increase of about 15% over the same period last year, and a net profit of about 570 million yuan. Although the profits of pig farming remain low this year, and the overall demand for pig feed in the industry is weak, the company continues to expand feed sales channels, feed sales have increased steadily, and the scale advantage has been further expanded.

In terms of specific categories, we estimate that 23Q3's pig feed sales are about 1.18 million tons, an increase of about 10% over the same period last year, ruminant sales are about 120000 tons, which is basically the same as the previous month, and aquatic material sales are about 100000 tons, a year-on-year decline. Looking forward to 23Q4, we believe that the company's feed sector will maintain sound operation and contribute to the company's core performance for the whole year.

Pig prices remain in the doldrums, and breeding business is under pressure. According to the company announcement, 23Q3 produced 1.38 million live pigs, an increase of 35.3% over the same period last year, and realized sales revenue of 2.36 billion yuan, down 8.6% from the same period last year. The company produced 4.1605 million live pigs in the first three quarters of 2023, an increase of 38.7% over the same period last year, and realized sales revenue of 6.77 billion yuan, an increase of 23.0% over the same period last year. Pig prices in the 23Q3 industry are still low, the pig farming industry is deeply losing money, and the company's breeding business is also under pressure. According to Wind data, the average price of 23Q3 pigs is 16 yuan / kg, down 28.6% from the same period last year, and the industry's self-breeding profits are-140yuan per pig. We estimate that 23Q3 achieved a profit of-200 million yuan, turning to a loss compared with the same period last year; in the first three quarters of 2023, the net profit of pig farming business was about-950 million yuan, an increase in loss compared with the same period last year. Considering that Q4 is the traditional peak consumption season and the increase in demand is expected to boost pig prices to some extent, we expect 23Q4's pig farming performance or marginal repair.

Transgenic industrialization has officially landed, and the company's biological breeding has entered the performance cash period. On October 17, 2023, the Ministry of Agriculture and Village issued the "publicity of varieties approved at the fourth examination and approval meeting of the Fifth National crop Variety approval Committee". A total of 22 genetically modified maize varieties with large agricultural characteristics passed the preliminary examination, accounting for 59% of the publicly publicized genetically modified maize varieties, of which 3 were owned by Dabei Nong. In addition, five companies' own traits and varieties of genetically modified soybeans passed the preliminary examination, accounting for 36% of the publicity. The first batch of variety approval officially landed, China's seed industry will usher in a new period, a new market for transgenic traits will be formed, and the seed industry will open scale expansion and pattern optimization. The company in this publicity of genetically modified corn, soybean varieties accounted for the highest proportion of neutral, is expected to rely on the first-mover advantage to establish long-term competitive barriers. In addition, the company's corn seed industry and biological breeding coordinated development, forming a strong cooperation. We believe that the company's genetically modified trait business is about to enter the performance cash period and occupy the largest market share, which is expected to provide the company with sustained and considerable performance growth flexibility.

Risk factors: pig price fluctuation risk; pig breeding epidemic risk; feed raw material price fluctuation risk; biological breeding industrialization is not as expected; natural disaster risk; grain price fluctuation risk.

Profit forecast, valuation and rating: 23Q3 pig prices remain in the doldrums, breeding deep losses drag on the company's overall performance. The sales scale of feed business has increased steadily, laying the foundation for the company's performance. As Q4 enters the traditional peak season of pig consumption, the performance of pig farming is expected to be marginal repaired. The industrialization of biological breeding has officially landed, and the company has invested in long-term R & D into the performance cash period, and is expected to establish long-term competitive barriers by virtue of the first-mover advantage. Considering the factors such as the official landing of pig breeding, feed, biological breeding industrialization, the competitive advantage of each business of the company, and considering the depressed pig price, we maintain the forecast EPS of 0.05kg 0.43pm 0.60 yuan from 2023 to 2025. With reference to Wind consensus expectation feed (Haida Group, New Hope average 12.6x PE), pig breeding (Wen's shares, Mu Yuan shares, superstar farming and animal husbandry average 10.5x PE), seed industry (Denghai seed industry, Tsuen Yin Hi-Tech, Longping Hi-Tech average 33.9x PE) comparable company valuation level in 2024, combined with the company's business competitiveness, give the company an overall 2024 PE valuation of 20 times, corresponding to the target price of 9 yuan. Maintain a "buy" rating.