Event: the company recently released its quarterly report on March 2023. In the first three quarters, the operating income was 23.914 billion yuan, an increase of 8.31%; the net profit was-909 million yuan, compared with 328 million yuan in the same period last year; and the net profit was-952 million yuan, compared with-401 million yuan in the same period last year.
In the third quarter alone, the operating income was 8.264 billion yuan, with a decrease of 5.02%; the net profit was-134 million yuan, compared with 179 million yuan in the same period last year; and the net profit was-201 million yuan, compared with 166 million yuan in the same period last year.
The decline in performance in the first three quarters was mainly affected by the aquaculture business, but the loss in a single quarter narrowed significantly. The company suffered losses in the first 3 quarters, and its performance declined significantly compared with the same period last year, mainly related to the poor performance of pig farming business. In the first three quarters of 2023, the performance of domestic pig prices remained in the doldrums, the aquaculture industry suffered widespread losses, and the development of the company's breeding and feed business was also affected. Entered the third quarter, pig prices rebounded, the company's breeding business losses significantly narrowed. Benefiting from this, the overall loss of the company has also narrowed significantly compared with the previous two quarters. In terms of breeding business, as of September 2023, the company has produced 4.16 million live pigs. According to the current speed, it is expected to produce 56-5.7 million pigs in the whole year. At the same time, the cost side is also constantly optimized, and the annual optimization target is 16 yuan / kg.
Transgenic industrialization from the pilot to a large-scale demonstration stage, the development of character companies to meet a good opportunity, the company has outstanding advantages in character products, which is the most beneficial target. On October 17, 2023, the Ministry of Agriculture and Village announced the results of the first national trial of the first batch of genetically modified corn and new soybean varieties in China. We believe that the issuance of variety approval number is a milestone event in the process of industrialization of genetically modified corn and soybean in China, which marks the industrialization from pilot to large-scale demonstration stage.
With the advance of industrialization, character companies and seed companies will usher in unprecedented opportunities for development.
Dabinong is a leading company in the field of genetically modified traits, whose characters account for 60% and 36% of the first genetically modified corn and soybean approval numbers, respectively, making the leading position very prominent. In addition, the company has obtained three product review numbers in the genetically modified corn variety link through its subsidiaries, accounting for about 8%. Therefore, in the future, companies can not only obtain patent royalties by providing character cooperation to other seed companies, but also get more profits from selling GM corn varieties directly through subsidiaries.
Profit forecast and investment advice. The company has ploughed the field of genetically modified corn and soybean characters for many years, and its first-mover advantage and system advantage are very obvious. we are optimistic about the long-term profit prospect of its character business. In addition, its seed business can also take advantage of its characters to a new level. Pig prices remain in the doldrums, and the production capacity of the breeding industry is about to be accelerated. We expect the cycle of pig prices to reverse in 2024. Accordingly, the company's pig farming business will be extremely successful and usher in the release of profits.
Based on this, give a "buy" rating. It is estimated that the 25-year net profit of the company is 5.65 / 1.283 billion yuan, corresponding to PE 50X/22X.
Risk hint: the price trend of live pigs is not as expected, and the progress of GM industrialization is not as expected.