Norpsin is a leading domestic pesticide formulation company. The company leverages its deep understanding and keen insight into agriculture to develop specialty fresh consumption businesses and create a second growth curve. The company has established a development strategy with base blueberries as the core single product. Currently, it has a first-mover advantage in Yunnan garden resources, patented varieties and early technology application promotion, nationwide sales channel construction, etc., and has achieved phased targets for production, sales volume and growth rate. In the current situation where the supply of blueberries in winter and spring is in short supply in China, the company's early ripe blueberries are expected to rise sharply in volume and price. At present, the Blueberry business has shown strong growth momentum and considerable performance elasticity. At the same time, the company's pesticide formulation business continues to maintain its leading edge in the industry, and is expected to help the specialty fresh consumption business in terms of capital, technology and talent.

We believe that the blueberry business has cultivated a new growth pole for the company and opened up medium- to long-term growth space, which is expected to create a new “Knopson”. Currently, the company's blueberry business and overall performance growth have reached an inflection point, and there is considerable room for growth in performance and market value. First coverage, giving a “buy” rating.

The pharmaceutical leader enters the specialty fresh food race track. As a leading domestic pesticide formulation company, with its in-depth understanding of the agricultural industry over the past 30 years, Nopson has accelerated the expansion of specialty fresh consumption business in recent years, creating the company's second growth curve. After years of exploration, the company established a base blueberry as the core single product in the specialty fresh consumption business, built a matrix of specialty fresh products, and focused on the winter and spring sales strategy. Currently, the pesticide formulation business has contributed to the company's stable performance, and the performance of the specialty fresh consumption business has begun to be realized. In the first half of 2023, the revenue of the specialty fresh consumption business increased sharply by 259% year-on-year, accounting for 16% of the company's overall revenue.

The Yunnan substrates of blueberries have both a favorable time and location, and the supply side of the industry will face major changes. Currently, the domestic supply of blueberries is highly seasonal. Traditionally, locally grown blueberries are sold in May-August every year, making it difficult to meet the growing demand for fresh blueberries. However, the price of imported blueberries is too high, and the supply is relatively limited, and the quality and freshness are weak. As one of the most suitable production areas for blueberries in the world, Yunnan is easy to cultivate blueberries with high quality and early maturation characteristics due to its unique climate and geographical conditions, which can effectively supplement the domestic supply of blueberries in winter and spring. However, due to factors such as elevation, regional climate, and land policies, orchards that can be used to grow blueberries are currently extremely scarce in Yunnan. As a result, blueberry growing companies with sufficient land resources in Yunnan will face core competition barriers.

Furthermore, high-quality patented varieties and the application of early-maturing technology will also promote the early listing of blueberries. We believe that under the current supply and demand pattern of oversupply of blueberries and significant seasonal shortages, enterprises with pioneering advantages in Yunnan garden resources and blueberry cultivation technology are expected to fully enjoy the strategic dividends of the blueberry industry development.

Land, technology, and sales have established strong barriers to competition, and the blueberry business has reached an inflection point. In terms of land, the company currently has 35,000 mu of land resources, and the fruit production area will reach about 20,000 mu in 2024. The company is still speeding up the expansion of its blueberry planting base. We expect that the company's blueberry production area will rapidly increase to 50,000 mu by 2026. We believe that with its sizable high-quality land resources in Yunnan, the company is expected to quickly develop a large-scale advantage in the blueberry base. On the technical side, the company is vigorously promoting an increase in the proportion of patented blueberry varieties and early application of technology. It is hoped that while diluting costs and expenses, it will seize a blank market at the end of the year and increase product sales prices. In terms of sales, the company is actively expanding the integrated production and marketing layout, establishing and perfecting the brand matrix, expanding the front warehouse model, and cooperating directly with the terminal sales network, which is expected to reduce costs and increase the level of gross profit. Furthermore, as a leading enterprise in the pesticide formulation industry, the pesticide formulation business continues to maintain its leading position in the industry, and empowers the specialty fresh consumption business in terms of capital, technology and talent, helping the company accelerate the development of the blueberry business.

Risk factors: Land development and plantation construction fall short of expectations; pesticide formulations or blueberry prices fluctuate greatly; risk of serious oversupply in the domestic blueberry market; company sales channel construction and promotion falling short of expectations; risk of extreme natural disasters; risk of related technology being blocked due to geopolitical conflicts.

Profit forecast, valuation and rating: Currently, the company is actively expanding the specialty fresh consumption business to create a second growth curve. With the rapid increase in the production area of blueberries, the base of its core product, the company's blueberry production and sales volume may grow rapidly. Taking into account that the company has a first-mover advantage in Yunnan garden resources, patented varieties, early technology application promotion, and national sales channel construction, etc., we expect the company's specialty fresh consumption business to contribute to core performance in the next three years. We forecast that the company's net profit from 2023-2025 will be 4.2/7.3/1.03 billion yuan, respectively, and the corresponding EPS forecast is 0.42/0.73/1.04 yuan. Taking into account the high growth expectations of the company's characteristic fresh consumption business and the leading industry position of the pesticide formulation business, with reference to agricultural product cultivation (Suken Nongfa, Beidahuang) and pesticide formulations (Yangnong Chemical, Runfeng Co., Ltd.), the current prices of listed companies are comparable to the 2024 average of 16x PE (predicted by CITIC Securities Research Department; the rest is the same forecast for Choice), and combined with absolute valuation results, we gave the company 16x PE in 2024, corresponding to the target market value of 1.2 billion yuan per share. First coverage, giving a “buy” rating.