2023 Q3 homing net profit-28.78 million yuan, YoY-492%

In the first three quarters of 2023, the company achieved operating income of 1.554 billion yuan, a year-on-year of + 1.2%, and a net profit of 10.64 million yuan, a year-on-year net profit of-72%. Of this total, 23Q3 achieved an income of 474 million yuan, a year-on-year net profit of-28.78 million yuan, a year-on-year net profit of-492%. Our analysis is mainly due to the normal fluctuation of sales in the off-season from a small base. We maintain the profit forecast and expect the company's EPS to be 0.29,0.40,0.54 yuan respectively in 2023-2025. With reference to the average value of 35 times PE in 2024, we give the company 35 times PE in 2024, with a target price of 13.97yuan (the previous value is 15.08yuan) and maintain a "buy" rating.

The advance payment is + 23% year-on-year and continues to grow high. Next year's boom can be expected because the sales of seed enterprises are generally concentrated in Q4Magi Q3. The advance payment at the end of Q3 is a forward-looking signal of the performance of the next sales quarter. As of the end of Q3, the advance payment of the company is 1.677 billion yuan, which is + 23% compared with the same period last year. Maintaining double-digit growth for the fourth year in a row, our analysis is mainly due to the overall strength of rice prices since the beginning of this year, high prices of corn and wheat, and high enthusiasm for planting downstream. At the same time, the company actively promotes epitaxial mergers and acquisitions, and shows that Hebei may contribute to the new era. The company's net profit in the first three quarters varies greatly from the same period last year, mainly due to seasonal factors. The contribution of the company's net profit in the first three quarters of 2019-2022 to the whole year is less than 16%, so it belongs to the normal fluctuation under the low base in the off-season.

Backed by the trait leader, Zhengda is expected to commercialize transgenic genes in the wind.

China seed Group Co., Ltd. (20.5%), the controlling shareholder of the company, is a wholly owned subsidiary of Syngenta, which has significant advantages in genetically modified products, complete global laws and regulations examination and approval, agrochemical business coordination and other remarkable advantages. In the list of the first batch of genetically modified crops announced by the Ministry of Agriculture and villages on October 17, the Chinese seed Group was approved for 4 GM corn traits / varieties respectively. It is expected to occupy the starting position. At the same time, the company insists on scientific research, and the transgenic insect-resistant corn project led by it has been stored for many years. In the future, it is expected to give further play to the synergistic advantages between Syngenta and Syngenta in the field of biological breeding, promote industrialization in an orderly manner, and enjoy the technical dividend of the seed industry.

Target price 13.97 yuan, maintain the "buy" rating

Based on the advantageous rice seed business, the company continues to expand horizontally to corn and wheat seeds, and actively expand order agriculture business downstream and reverse promote seed sales; in addition, we believe that as an important member of Syngenta seed industry plate, in the future, it is expected to deepen cooperation in the field of biological breeding and achieve further expansion in the context of GM commercialization. We maintain the profit forecast and expect the company's net profit from 2023 to 2025 to be 2.78,3.81 and 510 million yuan respectively.

Risk hints: the progress of the promotion of genetically modified varieties is not as expected, the effect of transgenic production is not as expected, the supervision of the seed industry is not as strong as expected, serious natural disasters occur, the performance of grain prices is not as expected, and so on.