3Q23 performance is in line with our expectations
The company announced 3Q23 performance, achieving revenue of 170 million yuan, + 38% year-on-year; net profit of 20 million yuan, + 20 million yuan. 1-3Q23 revenue from the same period last year + 16% to 650 million yuan, return to the mother net profit from-15% to 100 million yuan, in line with our expectations. We believe that under the background of high corn prices, the company's hybrid corn seeds in the new season may maintain a momentum of rapid growth, while the company's core variety corresponding to the genetically modified version Denghai 605D has been approved by the preliminary examination, which is expected to accelerate the increase of market share.
Trend of development
The main results are as follows: 1. With the support of the production power of high-quality and large varieties, the seed pre-collection of 23 prime 24 sales season has increased rapidly. We believe that corn prices will remain relatively high in 2023 to support the enthusiasm of seed purchases. according to iFinD,1-3Q23, the average domestic corn price is 2776.2 yuan / ton, which is + 1.9% compared with the same period last year. The company's high-quality corn varieties represented by Denghai 605 are favored by growers, and 3Q23 pre-sale is good, or form a support for the company's 4Q23 and 1Q24 performance. The company's 3Q23 income increased by 38%. At the end of 3Q23, the contract debt based on advance collection reached 1.07 billion yuan, an increase of 23.8%, and the contract debt reached an all-time high.
2. The rising cost of seed production is limited, and the price of corn grain remains high, supporting the improvement of gross profit margin. We believe that, 1) Maori end: the increase in the cost of corn seed production may narrow in 2023 compared with the same period last year, while high corn grain prices support seed prices, and the company's profitability is steadily rising. Company 3Q23 gross profit margin year-on-year + 17.5ppt to 34.7% bot 2) expense side: with the increase of revenue volume year-on-year, the company expense rate decreased significantly, 3Q23 sales / management / financial expense rate year-on-year-1.4/-5.2/+1.0ppt to 10.6% max 15.0% amp 4.5%. Under the combined influence, the company's 3Q23 achieved a net interest rate of 12.2%, a year-on-year + 12.1ppt.
3. Take the lead in benefiting from the industrialization of biological breeding, and the traditional hybrid maize seed leader is expected to open a new growth period.
We believe that, 1) Biological breeding: the first batch of quality review list covers Denghai 605D and Denghai 533D maize varieties, with both insect resistance and herbicide tolerance, among which Denghai 605D ranks fifth in the country in 2022 with a promotion area of 12.19 million mu. The company is expected to accelerate market share by virtue of first-mover advantages, high-quality varieties and complete commercial supporting facilities. At the same time, with Huang-Huai-Hai as the base, relying on the empowerment of genetically modified varieties, combined with localized R & D and promotion, the company is expected to successfully cut into the northeast market to open the growth ceiling. 2) Spatial calculation: the CR2 of overseas mature corn seed market is as high as 60%. We assume that the company's long-term market share is 15%, and the company's profit is expected to exceed 1 billion yuan after GM penetration reaches its peak.
Profit forecast and valuation
We keep our earnings forecast unchanged, with the current share price corresponding to 47max / 35x Pmax E / 2023max for 24 years. Maintain the industry rating and target price of 19 yuan unchanged, corresponding to the 2024 44 times Ppace E, 26% upside compared to the current stock price.
Risk
Intellectual property protection is not as expected, the industrialization process of biological breeding is not as expected, and extreme weather risk.