Core viewpoints

In the first three quarters of 2023, the company achieved operating income of 23.931 billion yuan, an increase of 8.31% over the same period last year, and a net profit of-908 million yuan, a decrease of 174.45% over the same period last year, a decrease of 5.02% over the same period last year, an increase of 4.74% over the previous year, and a net profit of-134 million yuan, a decrease of 174.84% and an increase of 71.33% over the same period last year. In the list of transgenic preliminary examination, 8 varieties were reviewed by Dabinong Holdings and indirect holding subsidiaries. From the perspective of the owners of the 14 transgenic soybean varieties, Dabinong transformant DBN9004 accounted for 5; among the 37 transgenic maize varieties, Dabinong transformants DBN9936, DBN3601T and DBN9858 accounted for 19, 2 and 1 respectively. Under the background of depressed pig prices, the company's pig farming business dragged down and led to overall performance losses, and the landing of the GM preliminary examination list is good for the company's seed business. With the accelerating process of GM commercialization, the company is expected to achieve rapid business growth by virtue of leading technology and resource advantages.

Event

The company disclosed that in the first three quarters of 2023, the company achieved operating income of 23.931 billion yuan, an increase of 8.31% over the same period last year, and a net profit of-908 million yuan, a decrease of 174.45%. Revenue of 2023Q3 fell by 174.45%, down 5.02% from the same period last year, and increased by 4.74% compared with the same period last year. The net profit was-134 million yuan, down 174.84% from the same period last year and up 71.33% from the previous year.

Brief comment

1. Q3 as a whole is still in a state of loss, and its performance has slightly improved in terms of plate revenue. In the first three quarters of 2023, the company's feed sector revenue was about 17.9 billion yuan, an increase of 12% over the same period last year, and that of pig raising was about 4.1 billion yuan, an increase of 26% over the same period last year. The revenue of the seed industry sector is about 340 million yuan, up 63.7% from the same period last year. 2023Q3 feed plate revenue of about 6.2 billion yuan, pig plate revenue of about 1.4 billion yuan, seed sector revenue of about 70 million yuan.

In terms of plate profits, in the first three quarters of 2023, the feed plate made a profit of about 600 million yuan, the pig raising plate lost about 900 million yuan, and the seed industry lost about 30 million yuan. 2023Q3 feed plate profit of more than 200 million yuan, pig plate loss of about 190 million yuan, seed industry plate profit of about 10 million yuan.

In terms of profit margin, the company's gross sales margin in the first three quarters of 2023 was 9.41% (year-1.92pcts) and net sales margin was-5.07% (year-3.61pcts). 2023Q3's gross profit margin is 10.85% (year-on-year-3.05pcts, month-on-month + 1.94pcts) and net sales margin is-2.06% (year-on-year-5.39pcts, month-on-month + 6.06pcts).

In terms of expenses, 2023Q3's sales expenses are 322 million yuan (year-on-year + 12.24%), management expenses are 415 million yuan (year-on-year-6.21%), financial expenses are 126 million yuan (year-on-year + 16.73%), and R & D expenses are 186 million yuan (year-on-year + 3.30%).

2. Pig feed export continues to grow. In terms of short-term pressurized feed sales caused by the adjustment of aquatic feed structure, the company's feed sales in the first three quarters of 2023 were about 4.3 million tons, an increase of 12% over the same period last year, of which pig feed sales were about 3.4 million tons (year-on-year + 18%). Revenue is about 13.7 billion yuan (year-on-year + 19%); ruminant sales is about 500000 tons (year-on-year + 7%), achieving revenue of about 1.8 billion yuan (+ 10%). Aquatic materials are nearly 300000 tons (20% compared with the same period last year), with revenue exceeding 1.6 billion yuan (19% compared with the same period last year). This is mainly due to the strategic adjustment of the company, focusing on high-end aquatic materials and optimizing general water materials. The export of 2023Q3 feed is about 1.5 million tons, of which pig feed exports about 1.2 million tons (year-on-year + 10%), achieving revenue of about 4.6 billion yuan (compared with the same period last year); ruminant exports nearly 200000 tons (- 8%), achieving revenue of about 600 million yuan (- 7%): aquatic material sales of more than 100000 tons (year-on-year decline), revenue of about 700 million yuan (- 27%).

3. The depressed pig market has put pressure on the plate, and the seed industry plate continues to make new progress. From January to September, the number of pigs sold by companies holding and participating companies totaled 4.1605 million, an increase of 38.49% over the same period last year, mainly due to the release of pig production capacity. Sales revenue totaled 6.771 billion yuan, an increase of 23.02% over the same period last year The average sales price of commodity fat pigs of the company holding and shareholding companies is 14.68 yuan / kg from January to September, which is-10.87% compared with the same period last year. From the perspective of business model, the company self-supporting model accounts for 15%, and the company + farm model accounts for 85%. From the point of view of the stock column, as of the end of September, the company holding and participating companies have kept 3.5 million live pigs, including nearly 230000 basic sows and more than 90,000 reserve sows. Pig prices remain depressed resulting in large losses in the pig plate, the future pig prices are expected to pick up, the plate performance is expected to recover.

Seed industry sector: from January to September, the company's total seed sales were 13.7 million kg (year-on-year + 65%), of which rice seed sales were 4.3 million kg, revenue was about 160 million yuan, corn seed sales was 4 million kg, and revenue was about 100 million yuan. In August, Brazil Dabinong Biology Co., Ltd., a wholly owned subsidiary of the company's Brazilian holding subsidiary, was awarded the Biosafety license (CQB), which is qualified to carry out independent research and development, regulatory registration and commercial promotion of genetically modified organisms in Brazil. In October, the superimposed event of transgenic herbicide-resistant soybean transformation event DBN9004 × DBN8002 (DBN-?9??4-6×DBN -? 8 resistant soybean 2-3) developed by Beijing Dabeinong Biotechnology Co., Ltd., a subsidiary of the company, passed the safety evaluation review and was formally approved. The superimposed event of DBN9004 × DBN8002 combines the advantages of DBN9004 and DBN8002, which can form excellent herbicide-resistant and insect-resistant products with strong market competitiveness. It is an important progress in expanding the South American market.

4. with the announcement of the list of preliminary examination of genetically modified crops, the company has obvious advantages in characters and varieties. The Ministry of Agriculture and Village publicizes the genetically modified corn, soybean varieties and related information approved at the fourth variety approval meeting of the Fifth National crop Variety approval Committee, including 37 genetically modified corn and 14 genetically modified soybean varieties. From the perspective of the applicant company, 8 varieties were reviewed by Dabeinong Holdings and indirect holding subsidiaries, including 5 genetically modified soybean varieties from Beijing Dabeinong Biotechnology Co., Ltd., 2 genetically modified corn varieties from Beijing Fengdu Hi-Tech seed Industry Co., Ltd., and 1 genetically modified corn varieties from Yunnan Datian seed Industry Co., Ltd., Beijing Dabeinong Biotechnology Co., Ltd. From the perspective of transformant owners, Dabinong transformant DBN9004 accounted for 5 of 14 transgenic soybean varieties, while among 37 transgenic maize varieties, Dabinong transformant DBN9936, DBN3601T and DBN9858 accounted for 19, 2 and 1 respectively. With the landing of the results of the first trial of genetically modified varieties, the commercialization of genetically modified varieties is gradually stepping into the fast lane, the process of industrialization is expected to accelerate, and the development of the domestic seed industry is about to usher in a new era. From the medium to long term, the commercial application of genetically modified varieties is expected to promote the change of industry pattern and benefit the development of companies.

5. Profit forecast and rating: under the background of depressed pig prices, the company's pig farming business is dragged down to cause overall performance losses, and the landing of the GM preliminary examination list is good for the company's seed business. With the accelerating process of GM commercialization, the company is expected to achieve rapid business growth by virtue of leading technology and resource advantages.

Considering that Q4 is the peak season for seed sales and pork consumption, it is expected to narrow the company's performance loss, but due to the large loss in the company's breeding business for the whole year, we downgrade the company's revenue and performance forecast. It is estimated that the company's operating income in 2023-2025 will be 373.585404.76 billion yuan (the previous value is 402.08 shock 470.405.313 billion yuan). The net profit of homing to mother is-7.54cm 4.18max 868 million yuan (previous value-1.22max 9791,491 million yuan) and EPS is-0.18max 0.10pm 0.21 yuan respectively. The company has obvious advantages in technology and resources in transgenic breeding. At the same time, the company actively extends the layout of the industrial chain. With the acceleration of the commercialization of genetically modified genes and the expectation that pig prices will pick up in the future, the company's performance is expected to return to growth. Maintain a "buy" rating.

Risk analysis.

The risk of ① feed raw material price fluctuation: affected by international trade relations, national collection and storage subsidy policy, extreme weather, downstream demand and harvest of major producing countries and other factors, corn and soybean meal prices continue to rise, thus affecting the cost of feed and breeding. Risk of ② epidemic and natural disasters: if a pig breeding epidemic occurs, it will not only lead to a reduction in pig production and stock, but also be transmitted to the upstream pig feed industry, which may affect feed demand, resulting in a decline in pig feed production and sales, and will bring significant operational risks to the company. Risk of ③ pig price fluctuation: pig farming business is affected by many factors, such as pig growth cycle, stock volume, feed price, supply and demand, etc., the fluctuation of pig market price will lead to the fluctuation of gross profit margin of pig breeding industry, in addition, if the pig listing rate decreases, it will affect pork supply and lead to pig price fluctuation. If pork prices continue to fluctuate sharply in the future, it will have an impact on the stability of the company's operating performance. ④ performance loss risk: the company's net profit in the first three quarters of 2023 was-908 million yuan, down 174.45% from the same period last year. This is mainly due to the severe losses in the pig-raising sector under the background of depressed pig prices, and the future pig price fluctuations are still full of uncertainty, which may lead to annual performance losses.