2023 Q4 net profit of 263 million yuan, YoY +35%
Tsuen Bank Hi-Tech released its annual report. In 2023, it achieved revenue of 4.103 billion yuan (yoy +17.54%), net profit to mother of 274 million yuan (yoy +17.37%), and deducted non-net profit of 234 million yuan (yoy +32.72%). Among them, Q4 achieved revenue of 2,549 billion yuan (yoy +30.41%, qoq +437.79%) and net profit of 263 million yuan (yoy +34.63%, qoq +1014.51%). We expect the company's 2024/25/26 net profit to be 3.78/5.02/589 million yuan, and EPS to be 0.40/0.53/0.62 yuan, respectively. Referring to 2024, which is 34 times the average PE value compared to the company Wind's consensus expectation, considering that the competitive pattern on the seed side is more scattered than on the characteristic side, the company will be given 25 times PE in 2024, with a target price of 10 yuan to maintain the “buy” rating.
Seed sales continue to grow, and the quantity and price of corn seeds has risen sharply
The company's revenue growth in 2023 was mainly due to increased product sales. In 2023, the company sold more than 200 million kilograms of seeds. Sales of rice, corn, and wheat seeds increased by 17%, 30%, and 43% year-on-year respectively. Among them, the quantity and price of corn seeds rose sharply, driving revenue from the three types of seeds increased 14%, 45%, and 35% respectively. Affected by factors such as increased seed processing costs, the company's gross margin of rice, corn, and seeds declined by 0.48, 7.41, and 1.58 pct year-on-year respectively in 2023, but driven by businesses other than seeds, the company's overall gross margin remained around 27%. In 23Q4, the company's revenue and profit growth accelerated markedly. Combined with the continued high year-on-year increase in the company's advance payments in 23Q3, the company's seed sales are expected to remain high in the 2023-2024 business year.
The main seed business continues to expand. It is expected that the Quanyin (Nancheng) Seed Finishing Center will be officially put into operation in September 2023 on the GM Commercial Express. The processing capacity of the Jiuquan Seed Processing Center in Gansu will also be gradually released, and the company's seed production area is expected to continue to increase. In particular, in terms of corn seeds, the company completed the acquisition of a controlling interest in Hebei New Era. The latter corn seeds have a high market share in Beijing, Tianjin, and Tang, and the company's corn seed industry is expected to expand and strengthen further. 2024 is the first year of commercialization of genetically-modified corn, and the price increase of genetically-modified seeds under market-based sales may be worth looking forward to. The company relies on Syngenta and has considerable advantages. Up to now, Syngenta has each been approved for 3/5 genetically-modified corn characters/variety certification numbers, and Quanyin has also been approved for 3 varieties in the second batch list, which is expected to occupy a first-mover position. The company adheres to scientific research. The genetically-modified insect-resistant corn project it has led has been in reserve for many years, and is expected to further develop its synergetic advantages with Syngenta in the field of biological breeding.
Target price of 10 yuan, maintaining “buy” rating
Based on its advantageous rice seed business, the company continues to expand horizontally towards corn and wheat seeds, and is actively expanding the contract agricultural business downstream and promoting seed sales in reverse. Furthermore, we believe that the company, as an important member of Syngenta's seed industry, is expected to deepen collaboration in the field of biological breeding in the future. We gave the company a target price of 10 yuan, maintaining a “buy” rating.
Risk warning: The promotion progress of genetically modified varieties falls short of expectations, the effect of increasing GM production falls short of expectations, seed industry supervision falls short of expectations, serious natural disasters have occurred, food price performance has fallen short of expectations, etc.