Performance summary: In the first three quarters of 2023, the company achieved operating income of 654 million yuan, +16.0% year-on-year, and net profit of 95.36 million yuan, -15.1% year-on-year; of these, 23Q3 achieved revenue of 171 million yuan, +37.7% year-on-year, and realized net profit of 20.79 million yuan, +12291% year-on-year.
Comment: The company's main business has maintained a growing trend, and corn seed sales have increased. The company's advance payment at the end of Q3 was 1.07 billion yuan, +24% over the same period last year. The main reason is that corn prices are at a historically high level, effectively increasing downstream farmers' enthusiasm for planting, causing significant changes in net profit in the third quarter under a low base. Under the influence of adverse factors such as rising production costs and still fierce market competition, the company adheres to market-orientation, seeks development through innovation, gives full play to the advantages of the “Denghai” brand, relies on the excellent market performance of varieties over the years, strengthens marketing efforts, and maintains the growth trend of its main business.
The grain-growing industry is improving with policy support, and commercialization of genetically modified genes has been further promoted. In January '22, the Ministry of Agriculture and Rural Affairs decided to revise some of the four regulations of the “Administrative Measures on the Safety Evaluation of Agricultural Genetically Modified Organisms”, “Approval Measures for Major Crop Varieties”, “Measures for the Administration of Crop Seed Production and Operation Licenses”, and “Regulations on the Naming of Agricultural Plant Varieties” to further regulate genetically modified management. In February '23, the National Agricultural Technology Center issued a “Notice on Application to Participate in the National Unified Testing of Genetically Modified Corn and Soybean Varieties” to establish a unified national test of genetically modified corn and soybean varieties. In August 2023, the Ministry of Agriculture and Rural Affairs announced that in 2023, 5 provinces and 20 counties will implement pilot industrial cultivation of genetically modified corn and soybeans. Industrialization of genetically modified corn and soybeans is being accelerated. Judging from the results of the pilot, genetically modified corn and soybeans can increase production by 5.6%-11.6%. Industrialization will bring about market growth. The company actively cooperates and reserves technology, and has a first-mover advantage. On the afternoon of October 17, 2023, on the afternoon of October 17, 2023, the Seed Industry Management Department of the Ministry of Agriculture and Rural Affairs and the Office of the National Crop Variety Evaluation Committee issued the “Notice on the Preliminary Review of the Varieties Approved by the Fifth National Crop Variety Evaluation Committee”, which passed 37 genetically modified corn varieties and 14 genetically modified soybean varieties. The publicity period is 30 days.
The company has strong scientific research and breeding capabilities and clear growth potential. In the first three quarters of 2023, the company invested 43.8854 million yuan in R&D, an increase of 40.88% over the previous year. In the first half of 2023, 10 new plant variety rights were applied for, of which 10 were hybrids and 0 were autohybrids; in the first half of 2023, 12 new plant variety rights were authorized. By the end of the reporting period, the company had obtained a total of 185 new plant variety rights; applied for 1 national patent, of which 1 was applied for; 2 authorized patents were obtained in the first half of 2023, including 2 authorized invention patents and unauthorized utility model patents and authorized designs; as of the end of the reporting period, the company had 38 effective patents, including 20 invention patents and 7 utility model patents.
Profit forecasts and investment advice. The 2023-2025 EPS is expected to be 0.37 yuan, 0.49 yuan, and 0.65 yuan respectively, and the corresponding dynamic PE will be 41/31/23 times, respectively, maintaining the “hold” rating.
Risk warning: Risks such as extreme weather and development progress falling short of expectations.